5 Flashcards
Wat is de pecking order theory
Internal funds (reinvested earnings) > New issues of debt > New issues of equity
Internal funds first because they don’‘t require an extra payment
New issues of debt second because it doesn’t lead to dillution and you can write it off your tax
Wat is een financial market en intermediary
A financial market is a market where financial assets (such as stocks and bonds) are issued and traded
A financial intermediary is an organization that raises money from investors and provides financing for individuals
Welke soorten financial markets zijn er
Primary market (where financial assets are issued to raise money from investors = primary issues);
Secondary market (where financial assets are purchased and sold by investors = secondary transactions);
Over-the-counter (OTC) markets (where financial assets are traded by a network of dealers, i.e., there is no organized exchange) currencies
Welke verschillende soorten bonds zijn er
Zero coupon
Fixed interest
Floating rate
Zero-coupon bonds (or pure discount bonds, e.g., US Treasury bills);
Fixed-interest coupon bonds (e.g., US Treasury notes & US Treasury bonds);
Floating-rate bonds (or floaters have variable interest rate that is tied to a benchmark rate, e.g., to
the Treasury bill rate)
Hoe bereken je de YTM van een zero coupon bond
Year 1/ year 0 - 1
Wat is de Present value of the coupons en wat is de Present value of the principal amount in de formule van de value van een bond
First part is present value of the coupon second part is present value of the principal amount
What is the benefit of a bond over a stock
Repayment and liquidation preference: bondholders get paid first with bankruptcy
Tax deductible: the bondissuer can deduct the interest paid on bonds of the taxable income
Waar hangt de sensitivity van een bond’s price vanaf
Duration – the longer the time to
maturity, the greater the interest rate risk
(all else equal).
Coupon rate – the lower the coupon
rate, the greater the interest rate risk (all
else equal)
What is het DDM model
P0 (present value of a stock)= D1/(1+R)1 = D2/(1+r)^2
d1= D0* (1+r)^1
d2= D1(1R)^2
Wat is het verschil tussen common stocks en preferred stocks
Common stocks have voting rights preferred stocks don’t
Common stocks have variable dividend
Preferred stocks have fixed dividend
Order to claim earnings is preferred before common stocks for example in bankruptcy
Wat is de formula a dividend constant groeit
p0=D1/r-g
Hoe bereken je de total return uit de formule van constante dividend growth
p0= D1/r-g
r= D1/p0 +g
Total return= dividend yield + capital gain
Wat is dividend yield
The expected cash dividend divided by the current price d1/p0
Wat is capital gain
The rate at which the stock price grows
Hoe bereken je het plowback ratio
Retained earning/ net income
1- Dividend payout ratio
