Description
700 words plus excel, see attachment for more guidance, Valuation of Financial Instruments
After engaging in a dialogue with your colleagues on valuation, you will now be given an opportunity to apply principles that were presented in this phase. Using a Web site that provides current stock and bond pricing and yield information, complete and analyze the tables illustrated below. Your mentor suggests using a Web site similar to this one.
To fill out the first table, you will need to select 3 bonds with maturities between 10 and 20 years with bond ratings of "A to AAA," "B to BBB" and "C to CC" (you may want to use bond screener at the Web site linked above). All of these bonds will have these values (future values) of $1,000. You will need to use a coupon rate of the bond times the face value to calculate the annual coupon payment. You should subtract the maturity date from the current year to determine the time to maturity. The Web site should provide you with the yield to maturity and the current quote for the bond. (Be sure to multiply the bond quote by 10 to get the current market value.) You will then need to indicate whether the bond is currently trading at a discount, premium, or par.
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Explanation & Answer
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Bond / company Name
Face Value
Coupon Rate
Annual Payment (PMT)
Time-to-Maturity
Yield-to-Maturity
Market Value
Discount, Premium, Par
San Lorenzo California Unified School
District Election 2008 Series E
8%
155.868
Aug-26
1.85
$75,000
Premium
A-Rated
B-Rated
C-Rated
$1,000
$1,000
$1,000
Walmart
Beta
Risk Free Rate of Return
5-Year Return of S&P 500 Index
0.64
2.76%
31.74%
28.98%
0.18544
21.30%
Required Rate of Return
Current Dividend
Projected Growth Rate of Dividends
Next year's Dividend
$0.52
2%
$0.53
19.30%
$2.75
Estimated Stock Price
Current Stock price
Estimated Earning
P/E Ratio
Estimated Stock Price
Under priced ,$0.56
Competitors
Macy's Inc
Target Corp
1.03
2.76%
22.42%
0.34
2.76%
-58.42%
19.66%
0.202498
23.01%
-61.18%
-0.208012
-18.04%
$0.64
13.20%
$0.65
$0.38
9.30%
$0.38
9.81%
$6.63
-27.34%
($1.38)
Under priced $3.58
0.69
1.69
0.53
Over priced $0.29
0.43
-1.69
0.29
Attached.
Running Head: FINANCIAL ANALYSIS
1
Financial Analysis
Student’s Name
Institution
Date
FINANCIAL ANALYSIS
2
Explain the relationship observed between ratings and yield to maturity.
Yield to maturity is the total amount of money a person hopes to make when they purchase
a bond and hold it to maturity the coupon rate is the interest earned on the bond every year based
on its face value. The two are related because; the coupon rate gives a person a...