Corporate Finance Assignment: Valuation of Bonds and Stocks

This corporate finance assignment provides a detailed analysis of bond and stock valuation techniques. It covers various aspects, including bond valuation with annual and semi-annual payments, yield to maturity (YTM) calculations, and the maturity risk premium. The assignment also delves into stock valuation methods, such as constant growth valuation, preferred stock valuation, and non-constant growth valuation models. The document presents calculations and results for each valuation method, providing a comprehensive overview of the core concepts in corporate finance. It includes examples of calculating market prices, share prices, and required rates of return, making it a valuable resource for students studying finance. Furthermore, the assignment includes a bibliography of relevant academic sources supporting the analysis. Desklib offers this solved assignment and other study resources to help students excel in their finance courses.

Running head: CORPORATE FINANCE
Corporate Finance
Name of the Student:
Name of the University:
Authors Note:

CORPORATE FINANCE
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Table of Contents
Chapter 5:...................................................................................................................................2
5-1 Bond Valuation with Annual Payments:.............................................................................2
5-2 YTM for Annual Payments:................................................................................................2
5-6 Maturity Risk Premium:......................................................................................................2
5-7 Bond Valuation with Semi-Annual Payments:....................................................................2
5-13 Yield to Maturity and Current Yield:................................................................................3
Chapter 7:...................................................................................................................................3
7-2 Constant Growth Valuation:................................................................................................3
7-4 Preferred Stock Valuation:...................................................................................................3
7-5 Non-constant Growth Valuation:.........................................................................................3
Bibliography:..............................................................................................................................5

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Chapter 5:
5-1 Bond Valuation with Annual Payments:
Bond Valuation with Annual Payments
Particulars Value
Time 12.00
Coupon rate 8.00%
YTM 9.00%
Par value $ 1,000.00
Market Price of the bond $ 928.39
5-2 YTM for Annual Payments:
YTM for Annual Payments
Particulars Value
Time 12.00
Coupon rate 10.00%
Par value $ 1,000.00
Market Price of the bond $ 850.00
YTM 12.48%
5-6 Maturity Risk Premium:
Maturity Risk Premium
Particulars Value
Risk free rate 3.00%
Inflation 3.00%
Yield of treasury 6.30%
Maturity risk premium 0.30%
5-7 Bond Valuation with Semi-Annual Payments:
Bond Valuation with Semi-Annual Payments
Particulars Value
Time 8.00
T 16.00
Coupon rate 10.00%
C 5.00%
Yield to maturity 8.50%
YTM 4.25%
Par value $ 1,000.00

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Market Price of the bond $ 1,085.80
5-13 Yield to Maturity and Current Yield:
Yield to Maturity and Current Yield
Particulars Value
Time 5.00
Coupon rate 8.00%
YTM 8.21%
Par value $ 1,000.00
Market Price of the bond $ 974.42
YTM 8.65%
Chapter 7:
7-2 Constant Growth Valuation:
Constant Growth Valuation
Particulars Value
Dividend $ 1.50
Required rate of return 13.00%
Constant rate 6.00%
Share price of Boehm’s
stock $ 21.43
7-4 Preferred Stock Valuation:
Preferred Stock Valuation
Particulars Value
Dividend per share $ 5.00
Share price $ 50.00
Required rate of return 10.00%
7-5 Non-constant Growth Valuation:
Non-constant Growth Valuation
Particulars Value
Beta 1.20
Market premium 4.00%
risk free rate 7.50%
Required rate of return 12.30%
Growth rate 20%
Dividend $ 2.00
Constant rate 7.00%

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Particular
s Value Dis-rate Dis-Value
D1 $ 2.40 0.89047 $ 2.14
D2 $ 2.88 0.79294 $ 2.28
D3 $ 58.14 0.79294 $ 46.10
Share price $ 50.53

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Bibliography:
Ballotta, L. and Kyriakou, I., 2015. Convertible bond valuation in a jump diffusion setting
with stochastic interest rates. Quantitative Finance, 15(1), pp.115-129.
Batten, J.A., Khaw, K.L.H. and Young, M.R., 2014. Convertible bond pricing
models. Journal of Economic Surveys, 28(5), pp.775-803.