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Corperate Finance Managers > Lectrure 3 > Flashcards

Lectrure 3 Flashcards

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1
Q

What is an asset =

A

Sequence of cash flows

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2
Q

What is the value of an asset

A

Value of all its future cash flows

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3
Q

Asset 0 =

A

CF1, CF2, …, CFt

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4
Q

What does a bond obligate

A

Obligates the borrower to make specified payments to the lender of the bond

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5
Q

What do bond holders not own

A

The entity that issues the bond

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6
Q

What is it called the periodically fixed interest payment

A

Coupon

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7
Q

When do they repay the fixed amount

A

Date of maturity

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8
Q

Money market =

A

Short term issues that mature within one year

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9
Q

Notes =

A

Intermediate term issues that matures between 1 -10 years

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10
Q

Bonds =

A

Long term obligation with maturity greater than 10 years

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11
Q

Face( par) value

A

Payment at the maturity of the bond

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12
Q

Coupon

A

Interest payments paid to the bond holders

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13
Q

Coupon rate

A

Annual interest payment as a percentage of the face value

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14
Q

Zero coupon bond

A

Coupon rate = 0

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15
Q

Maturity date

A

When all coupon payments are made and principle repaid

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16
Q

Who are the investors in bonds

A

Individuals
Pension funds
Banks
Insurnace companies
Property companies

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17
Q

Who can be issuer of bonds

A

Governments
Corperations
International issues

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18
Q

Who are treasury securities issued by

A

Us treasury

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19
Q

What’s good about treasury securities

A

Backed by full faith and credit of us
Considered to be free from credit risk

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20
Q

What are treasury strips

A

us treasury doesn’t off zero coupon bonds so investment bankers began stripping the coupons from treasuries to create zero coupon securities to meet investor demands

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21
Q

What are tips

A

Makes semi annual coupon interest payments at a fixed rate

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22
Q

What happens with the par value of tips

A

Begins at 1000 dollars and are adjusted semiannually for changes in CPI

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23
Q

Secured bonds

A

Secured against assets s

24
Q

Unsecured bonds

A

Not backed by collaterals

25
Q

Subordinated debentures

A

Lower priority in the event of bankruptcy

26
Q

Accrued interest

A

Arise when bond trades between coupon dates

27
Q

What a re price quotes

A

Percentage of par

28
Q

Clean bond prices

A

Quoted price is clean

29
Q

DIrty bond price

A

Clean price plus accrued interest

30
Q

Yield to maturity is the …

A

Opportunity cost of capital for a bond

31
Q

When is the only payment for 0 coupon bonds

A

At maturity

32
Q

What are t bills

A

Government zero coupon bonds with a maturity of up to one year

33
Q

Price o zero coupon bonds =

A

Par value / (1+yield %)

34
Q

Value of coupon bond worth single discount rate

A

Present value of the interest annuity payments + present value of the par value

(Interest payment/yield %) * (1-(1+yield%)^t)

+

par value/ (1+yield%)^t

35
Q

When bond price is lower than par

A

Coupon rate < yield to maturity

36
Q

When bond price is larger than par

A

Coupon rate > yield to maturity

37
Q

Bond price = par value

A

Coupon rate = yield to maturity

38
Q

What is relationship between bond price and yield to maturity

A

As price decreases, YTM increases

39
Q

Common stock

A

Ownership shares in publicly held corperations

40
Q

What is the income for shares

A

Dividends

41
Q

Primary market of stocks

A

New securities

42
Q

Secondary stock market

A

Previously issued securities

43
Q

private equity

A

Asset class consisting of equity securities in operations companies not listed on the public stock exchange

44
Q

Market capitalisation

A

Total value of a companies outstanding shares

45
Q

P/E ratio

A

Ratio of stock price to earnings per share

46
Q

Dividend yield

A

Dividends paid over share price

47
Q

Book value

A

Net worth of firm according to balance sheet

48
Q

Liquidation value

A

Net proceeds that could be realised by selling firms assets and paying of its creditors

49
Q

Market value

A

Value of the firm determined by its investors who would be willing to purchase company

50
Q

Intangibale assets

A

Many assets can’t be quantified for example a companies brand or managerial expertise

51
Q

Going concern value

A

Difference between company’s actual value and its book or liquidation value

52
Q

Intrinsic valuation

A

Value of a asset of a function of its fundamentals

53
Q

What is used to estimate intrinsic cash flows q

A

Discounted cash flows models

54
Q

Relative valuation

A

Value of asset estimated by what investors would pay for similar asset

55
Q

Contingent claim valuation

A

When cash flows of an asset are contingent on an external event

56
Q

How is value estimated for contingent claim valuation

A

Option pricing models

Corperate Finance Managers (9 decks)

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