FIN 300 Lecture Notes - Lecture 12: Tax Rate, Operating Cash Flow, Tax Shield

• School: Ryerson University
• Department: Finance
• Course: FIN 300
• Professor: Laleh Samarbakhsh

Document Summary

Coupon rate: int pmt/ fv, bond price decrease when interest increases. Bond valuation: pv= vofb x[ 1-({1/1+ytm^n}/ytm})+ (fv/{1+ytm}^n calc-> n= yrs, i/y=%, pmt=coup(if semi /2), fv=face,pv= val of bond. 1+r= 115. 50/100, bring 1 over (-) = 15. 5% With we got 20, 1+r= 22/20, r=10% Fisher effect: real rate(r), nom rates (r), expected inf (h) N= 15x2, i/y=?,pv= -989, pmt= 80/2, fv= 1000. ^i/y= 4. 0641 semi annually if sold at par, 4. 0641 x1000= . 641 coupon semi, annual is . 28 coupon rate: coup amount/face value, 81. 28/1000= 8. 13% Ex: hpy:a) today you buy 7% annual coup bond for 1060. ^(n=10, i/y= ?, pv= -1060, pmt =70, fv= 1000) i/y= 6. 178: 2 years from now,ytm on bond declined 1%, what is sell price/ hpy. ^ (n=8, i/y= 5. 178, pv=?, pmt= 70, fv: 1000) pv= . 92. ^hpy( n=2, i/y=?, pv=-1060, pmt= 70, fv=1116. 92) i/y= 9. 17.