FIN 401 Study Guide - Midterm Guide: Interest Rate Cap And Floor, Forward Contract, Forward Price
23 Apr 2013
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Chapter 15- raising capital chapter 24- risk management and derivative securities. 2- increase value of these investments 3- contracts derivatives ownership=# shares held/total shares. Derivative: security or asset whose value is derived from some underlying security or asset. Seasonal offering: everyone knows the price per share, they are already investors ex) co wants to raise m equity 1-sell shares a-discount price (below mrkt price) b- flotation costs (transaction fe=5% (100/1-0. 05)=210. 5m) 2- Rights give owners the right, but not the obligation to buy 1 share of co on a future date, for same price in exchange for some number of rights. Types: forward contract buy future asset for price, future exchange forward contracts, American options: may be exercised on day up to and including expiry. Shares os/(rights amount/s) when you buy stocks you don t get the rights, price drops, rights trade on own [after ex right price do not include +1] Date: 4 days prior to holder of record.
