Explain bond valuation and risk analysis and pricing theory
Finance Business
Explain Bond valuation and risk analysis and pricing theory
1. Treasury Bond: Is it true that a US treasury securities is risk free
2. Interest Rate Risk: Which has greater Interest Rate Risk 30-year Treasury bond or a 30-years BB Corporate bond?
3. Treasury Pricing: With regard to Bid and Ask prices on a Treasury bond is it possible for the bid price to be higher? Why or Why not?
4. Yield to Maturity: Treasury Bid and Ask quotes has sometimes given in terms of yield, so there would be a bid yield and an ask yield which do you think would be larger? Explain.
5. Call Provisions: A company is contemplating a long-term bond issue. It is debating whether to include a call provision? What are the benefits of the company from including a call provision? What are the costs? How do these answer change for a put provision?
6. Coupon Rate: How does a bond issuer decided on the appropriate coupon rate to set on its bonds? Explain the difference between the coupon rate and the required rate of return on a bond.
7. Real and Nominal Return: Are there any circumstances under which an investor might be more concerned about the nominal return on an investment than real return?
8. Bond Ratings: Companies pay ratings agencies such as Moody\’s and S&P to rate their bonds, and the costs can be substantial .However, companies are not required to have their bonds, rated; doing so is strictly voluntary. Why do you think they do it?
9. Stock Valuations: Evaluate the following the statement: Manager should not focus on the current stock value because doing so will lead to an over emphasis on short-term profits at the expenses of long term profit?
10. Two Stage Dividend Growth Model: One of the assumptions for the two stage dividend growth model is that the dividends drop immediately from the high growth rate to the perpetual growth rate. What do you think about this assumption?
