Reference no: EM132942439
A company generally has two ways to handle its sinking fund: It can either call its bond or purchase its bonds on the open market. If you are the financial manager of the company, how should you do?
When is the estimated bond value equal to its par value? greater than its par value (premium bond)? Or lower than its par value (discounted bond)? Why does the market value of a bond (either a discounted or a premium bond) always approach its par value as its maturity date approaches?
What's yield to maturity (YTM)? capital gain yield? current yield? How about their relationships?
What's Yield to Call (YTC)? What's the difference between YTC and YTM?
As interest rate rises, bond price decrease. How to understand the relationship of bond price and interest rate? Could you show us a real example?
Compare the interest rate risk and reinvestment rate risk between a 10-year bond and a 1-year bond. We assume the two binds have the same coupon rate at 10%.
Is the calculation of a semiannual bond value using a financial calculator different from the calculation of an annual bond value? How?
What's nominal risk-free rate? What's real risk-free rate? How about their relationship?
How to estimate inflation premium (IP)? How to estimate maturity risk premium (MRP)? How to define bond spread?
What's the purpose of bond ratings? Give us 5 different publicly-traded firms which have S&P AAA, AA, A, BBB, BB ratings respectively?
What factors affect bond rating agencies' (i.e., S&P, Moody's) decisions on a company's bond rating? How do bond ratings affect a bond's yield? How does the change of the bond ratings affect the firm's stock price? Give us a real example.
What's the term structure of interest rate? What's yield curve? Could you use mortgage rates to explain the theory?
Discuss the losers and winners in a typical corporate bankruptcy case?
How to calculate an individual stock's return? stock risk? coefficient of variation?
How to compute the expected return and the risk (standard deviation) for a two-stock portfolio?
What are the general company-specific (diversifiable) risk and market (undiversifiable) risk faced by a publicly-traded firm? any real examples? How does the number of stocks in a portfolio affect its company-specific risk and market risk?
What is the number of stocks in your stock investment portfolio? Do you believe the portfolio has eliminated most of the company-specific risk?
Capital Asset Pricing Model (CAPM) is one the most important theories in finance. What is the theory? Why is it so important?
In CAPM, what's beta? What kind of risk is the beta used to measure? How to calculate an individual stock's beta based on its definition?
What's the beta value for a market portfolio? Find two publicly-traded firms, one of which has the beta value larger than that of the market portfolio, and one of which has the beta value smaller than that of the market portfolio.
If you invest on the stock market currently, do you prefer high-beta stocks or low-beta stocks? why?
What's Security Market Line (SML)? Draw the SML for an individual stock and interpret its intercept and slope.
How to estimate beta in practice? For example, how does Yahoo! Finance (or Google Finance) get beta values for publicly-traded firms?
How does inflation change affect a firm's security market line (SML)? How does investors risk aversion change affect a firm's security market line (SML)?
Discuss the potential risk and return on the U.S. stock market in 2021 and beyond.