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Semester Spring 2014 Graded Discussion Board Corporate Finance (FIN622) Concept to be tested: “Bond Valuation” Discussion Question Mr. Afzal has been offered to buy a bond from his friend Mr. Khan who bought it two years back at a par value of PKR 10,000 with a maturity period of 10 years and annual coupon rate of 12.25%. The market interest rate was 12.25% two years back, which is 9.5% now. Mr. Khan has offered him the bond on same price i.e. PKR 10,000. Should Mr. Afzal buy it? Is it rational for Mr. Khan to sell the bond on par value? Support your comments with logical reasons.
(Note: Your discussion should not exceed 150 words. No calculation is required; you are only supposed to discuss the scenario.) Note: For acquiring the relevant knowledge, do not rely only on handouts but also watch the course video lectures and read additional material available online or in any other mode. Important Instructions: · Your discussion must be based on logical facts. · The GDB will open and close on above specified date and time. Please note that no grace day or extra time will be given for posting comments on GDB. · Use the font style “Times New Roman” and font size “12”. · Your answer should be relevant to the topic i.e. clear and concise. · Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course. · Books, websites and other reading material may be consulted before posting your comments; but copying or reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0) even if you provide references. · You should post your answer on the Graded Discussion Board (GDB), not on the Moderated Discussion Board (MDB). Both will run parallel to each other during the time specified above. Therefore, due care will be needed. · Obnoxious or ignoble answer should be strictly avoided. · You cannot participate in the discussion after the due date via email. · Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over. · For planning your semester activities in an organized manner, you are advised to view schedule of upcoming Assignments, Quizzes and GDBs in the overview tab of the course website on VU-LMS.

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Replies to This Discussion

any one can help plz this gdb bcase 1 he din mila he is me

1 1225 1119
2 1225 1022
3 1225 933
4 1225 852
5 1225 778
6 1225 711
7 1225 649
8 1225 593
8 10000 4838

11494

This is the Logical Reason

ye kai bataya hai apne kuch samj ni aya

A ع M ا I م R ر 

which formula u have used

Please note instructor don't need the mathematical solution. It is for your understanding

i think no body wants help here..

vu students have become genius :)

Look, on this bond 2 years already have been passed, now it have maturity of 8 years. The seller already enjoyed 2 coupons and now again want to sell it on Par Value.

The buyer is buying it at par value =10000 and will receive stream of cash flows as I calculated above with required rate of return. The total value of bond in this way is 11,494.

Now I think you can understand the situation

thanks

koi ye hi guide kar dai ke start kahan se karna hain . confusion hai buhat
yes ab samj a gaya hai meiny bi calculate kiya hai. answer wo hi hai jo ap bata rahey hain.
ab GDB ke anser mein kai ye hi logic explain karni hai kai?

Yes, you have to explain the logic, the rationale

present 9.5% interest rate hai tou kya decision is k according nhi liya jaye ga?

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