- Solve the following problems:
Study problems: 7.10, 7.11.
- Starting from Page 255, three important bond relationships are discussed. State these three relationships in your own words and briefly describe what the implications of each of these are in terms of bond pricing.
- Describe the following terms which are related to bond valuation:
- Claims on assets and income
- Par value
- Coupon rate
- Maturity
- Call provision
- Indenture
- Bond rating
Stocks
Ch.8
- Solve
Study problems: 8.12, 8.13 and 8.15.
- What features of common stock indicate ownership in the corporation versus preferred
stock or bonds? In what two ways does a shareholder benefit from ownership?
- Describe the process for common stock valuation.
Risk and return
Ch.6
- Solve the following problems:
Study problems: 6.3, 6.15, 6.23
- What is unsystematic risk (company-unique or diversifiable risk) and systematic risk (market or non-diversifiable risk)?
- What is a beta? How is it used to calculate the investor’s required rate of return?
- Over the past eight decades, we have had the opportunity to observe the rates of return and the variability of these returns for different types of securities (Refer to Figure 6.2 and the related section). Summarize these observations.
