Principles of Corporate Finance

What is a Convertible Bond? w ALZA Ë 5% Convertible 2006 Ë Convertible into 26.2 shares Ë Conversion ratio 26.2 Ë Conversion pri ...

What is a Convertible Bond? w ALZA Ë 5% Convertible 2006 Ë Convertible into 26.2 shares Ë Conversion ratio 26.2 Ë Conversion pri ...

What is a Convertible Bond? w How bond value varies with firm value at maturity. 0 1 2 3 0 1 2 3 4 5 Value of firm ($ million) d ...

What is a Convertible Bond? w How conversion value at maturity varies with firm value. 0 1 2 3 0 0.5 1 1.5 2 2.5 3 3.5 4 Value o ...

What is a Convertible Bond? w How value of convertible at maturity varies with firm value. 0 1 2 3 0 1 2 3 4 Value of firm ($ mi ...

u Valuing Debt Principles of Corporate Finance Brealey and Myers Sixth Edition Chapter 23 ...

Topics Covered w The Classical Theory of Interest w The Term Structure and YTM w Duration and Volatility w Explaining the Term S ...

Debt & Interest Rates Classical Theory of Interest Rates (Economics) wdeveloped by Irving Fisher ...

Debt & Interest Rates Classical Theory of Interest Rates (Economics) wdeveloped by Irving Fisher Nominal Interest Rate = The ...

Debt & Interest Rates Classical Theory of Interest Rates (Economics) w developed by Irving Fisher Nominal Interest Rate = Th ...

Debt & Interest Rates Nominal r = Real r + expected inflation Real r is theoretically somewhat stable Inflation is a large v ...

Term Structure Spot Rate - The actual interest rate today (t=0) Forward Rate - The interest rate, fixed today, on a loan made in ...

Debt & Risk Example (Bond 1) Calculate the duration of our 10.5% bond @ 8.5% YTM Year CF PV@YTM % of Total PV % x Year ...

Debt & Risk Example (Bond 1) Calculate the duration of our 10.5% bond @ 8.5% YTM Year CF PV@YTM % of Total PV % x Year 1 105 ...

Debt & Risk Example (Bond 1) Calculate the duration of our 10.5% bond @ 8.5% YTM Year CF PV@YTM % of Total PV % x Year 1 105 ...

Debt & Risk Year CF PV@YTM % of Total PV % x Year 1 105 96.77 .090 2 105 89.19 .083 3 105 82.21 .076 4 105 75.77 .070 5 1105 ...

Debt & Risk Year CF PV@YTM % of Total PV % x Year 1 105 96.77 .090 0.090 2 105 89.19 .083 0.164 3 105 82.21 .076 0.227 4 105 ...

Debt & Risk Example (Bond 2) Given a 5 year, 9.0%, $1000 bond, with a 8.5% YTM, what is this bond’s duration? Year CF PV@YTM ...

Debt & Risk Year CF PV@YTM % of Total PV % x Year 1 90 2 90 3 90 4 90 5 1090 Example (Bond 2) Given a 5 year, 9.0%, $1000 bo ...

Debt & Risk Year CF PV@YTM % of Total PV % x Year 1 90 82.95 2 90 76.45 3 90 70.46 4 90 64.94 5 1090 724.90 1019.70 Example ...