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Questions and Answers
According to the constant growth model, what is the intrinsic value of the preferred stock with a dividend of Rs. 3.00 per year and a required return of 9%?
According to the constant growth model, what is the intrinsic value of the preferred stock with a dividend of Rs. 3.00 per year and a required return of 9%?
What is the main difference between shares and bonds?
What is the main difference between shares and bonds?
What is defined as the present value of all cash proceeds to the investor in the stock?
What is defined as the present value of all cash proceeds to the investor in the stock?
If Stock X is expected to pay a dividend of Rs. 3 in the upcoming year and the expected growth rate of dividends for both stocks is 7%, what is the intrinsic value of stock X if you wish to earn a return of 13%?
If Stock X is expected to pay a dividend of Rs. 3 in the upcoming year and the expected growth rate of dividends for both stocks is 7%, what is the intrinsic value of stock X if you wish to earn a return of 13%?
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When is goodwill to be valued?
When is goodwill to be valued?
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The present value of interest payments received by a bond or debenture is also known as __.
The present value of interest payments received by a bond or debenture is also known as __.
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If the required rate of return is greater than the coupon rate, the bond will be valued at __.
If the required rate of return is greater than the coupon rate, the bond will be valued at __.
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When the coupon rate is constant, the value of a bond when close to maturity will be closest to __.
When the coupon rate is constant, the value of a bond when close to maturity will be closest to __.
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A bond is said to be issued at a premium when __.
A bond is said to be issued at a premium when __.
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Where are shares and bonds typically traded?
Where are shares and bonds typically traded?
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Study Notes
Intrinsic Value of Preferred Stock
- Intrinsic value of preferred stock with a dividend of Rs. 3.00 per year and a required return of 9% can be calculated using the constant growth model.
Shares vs Bonds
- Main difference between shares and bonds: shares represent ownership in a company, while bonds represent debt.
Intrinsic Value of Stock
- Intrinsic value of a stock is the present value of all cash proceeds to the investor in the stock.
Constant Growth Model
- If Stock X is expected to pay a dividend of Rs. 3 in the upcoming year and the expected growth rate of dividends is 7%, the intrinsic value of Stock X can be calculated using the constant growth model, assuming a required return of 13%.
Goodwill Valuation
- Goodwill is to be valued when a company is acquired or merged.
Present Value of Interest Payments
- Present value of interest payments received by a bond or debenture is also known as the present value of interest.
Bond Valuation
- If the required rate of return is greater than the coupon rate, the bond will be valued at a discount.
- When the coupon rate is constant, the value of a bond when close to maturity will be closest to its face value.
- A bond is said to be issued at a premium when the market price is higher than the face value.
Trading of Shares and Bonds
- Shares and bonds are typically traded on stock exchanges.
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Description
Test your knowledge of bond and debenture valuation with this multiple-choice question practice set. Challenge yourself with questions about present value of interest and contractual payments, redemption amount, required rate of return, and more.
