Dividend Discount Models (DDMs)
Learning Outcomes By the end of this section, you will be able to: The dividend discount model (DDM) is a method used to value a stock based on the concept that its worth is the present value of all of its future…
Multiple Approaches to Stock Valuation
Learning Outcomes By the end of this section, you will be able to: The Price-to Earnings (P/E) Ratio Experienced investors use a number of different methods to evaluate information on companies and their common stock before deciding on any potential…
Why It Matters
Figure 11.1 In addition to bonds, corporations will often issue common stock as a means of raising necessary capital to finance future operations. (credit: modification of “New York Stock Exchange Huge US Flag Photo i018” by Grant Wickes/flickr, CC BY 2.0) Chapter…
Summary
Characteristics of Bonds Bonds are typically a basic form of investment that entails a straightforward financial agreement between issuer and purchaser. There are three primary categories of bonds: government bonds, corporate bonds, and convertible bonds. These different types of bond…
Using Spreadsheets to Solve Bond Problems
Learning Outcomes By the end of this section, you will be able to: Calculating the Price (Present Value) of a Bond The following examples illustrate how Microsoft Excel can be used to calculate common bond problems. Please be sure to…
Risks of Interest Rates and Default
Learning Outcomes By the end of this section, you will be able to: Bond Risks As we touched on earlier, bonds are fixed-income investments, and because of this, they are subject to a number of risks that could have negative…
Using the Yield Curve
Learning Outcomes By the end of this section, you will be able to: Term Structure of Interest Rates The expected yields of various bonds across different maturity periods are referred to as the term structure of interest rates. This is because…
Bond Valuation
Learning Outcomes By the end of this section, you will be able to: Pricing a Bond in Steps Why do we want to learn how to price a bond? The answer goes to the heart of finance: the valuation of…
Characteristics of Bonds
Learning Outcomes By the end of this section, you will be able to: Bonds as Investments One way to look at bond investments is to consider the fact that any investor who purchases a bond is essentially buying a future…
Why It Matters
Figure 10.1 Bonds are very useful investments to add to a portfolio. (credit: modification of “US Treasury Checks – 3D Illustration” by DonkeyHotey/flickr, CC BY 2.0) Chapter Outline 10.1 Characteristics of Bonds 10.2 Bond Valuation 10.3 Using the Yield Curve 10.4 Risks of Interest Rates and…