BUSI 2503 Chapter Notes -Bond Valuation
28 Dec 2014
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Document Summary
The value of an asset is determined by what someone else is prepared to pay for it at the moment. Market value - what someone is prepared to pay for a financial asset or security. Financial assets that trade in financial markets, change in price minute by minute. Financial asset (capital) - a claim against a firm, government or individual for future expected cash flows. Market value derived from future expected benefits and the return investors expect from those benefits. Prices will be bid up or down as the financial assets are exchanged between investors. The present value of on future anticipated cash flows derived using an appropriate discount rate. The present value of a financial asset"s future should be equal to its market value. Required rate of return - the discount rate used for time value calculations. Depends on the market"s perceived level of risk associated with an individual security.
