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Midterm Reviewer (Capital Market)

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22 views2 pages

Midterm Reviewer (Capital Market)

Uploaded by

jeanettesimbillo09
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CAPITAL MARKET REVIEWER

Fixed Income Security is basically a form of debt wherein a company or the govemment borrows money from the
investing public
Dividends part of the company earnings that are paid out to stockholders
Cash Dividends amount that a stockholder will|
receive for every share
Stock Dividend additional number of shares a stockholder will receive for every share
Technical Analysis to pick stocks are generally concerned with the price movement

Bond is a loan investors make to a company or government.

Bond Basics it is a debt security whereas the investor acts as the lender and creditor
Bonds debt Investment, issued both by the government and company
Stock equity Investment, issued most by the company.

SEVEN VARIABLES THAT AFFECT THE VALUE OF A BOND


1. Maturity
o Short Term up to 4years
o Medium Term five to 12years
o Long Term 12 or more years.
2. Redemption Feature
o Call Option allows or require the issuer to repay the investor principal at a specified date before maturity
o Put Option requiring the issuer to repurchase the bonds at a specified time
3.Credit Quality a measure of individual or company creditworthiness
4.Interest Rate
o Fixed
o Floating
o Payable at Maturity
5.Price bonds that sold higher than their face value "premium"
6.Yield return the earn of the bond based on the price you paid
o Current Yield the amount return on the dollar amount paid for the bond
o Yield to Maturity total return you will receive by holding the bond until its matures

OTHER TYPES OF BONDS


o Treasury Bonds are government bonds used to finance the government debt
o Callable Bonds can be bought back by the issuing entity as a stated price in the future
o Junk Bonds very risky and thus pay much higher interest
o Zero Coupon Bonds bonds that do not pay Interest not until the maturity date
o Coupon Bearing Bonds bonds that make coupon payments during the life of a bond.
o Convertible Bonds bonds that are convertible in common stock

Equity represents the value that would be returned to a company's shareholders

5 EQUITY VALUATION TECHNIQUES/METHODS


o DCF or discounted cash flow method is an equity valuation method based on future cash flows to
estimate the current investment value
o Comparable Method is based on the theory that an equity's value should show a similarity to other equities
o Book value method is the price paid for that asset minus depreciation
o Market value method is done by comparing your company to the firms similar to yours that have recently
been sold in the market
o Asset based valuation adds all assets of the firm together, is usually done on the basis of a going concern
or on a liquidity basis

Expected return is the profit or loss that an investor anticipates on an investment that has known historical rates of
return (RoR).
Single period dividend discount model is used to determine the intrinsic value of a stock that is planned to be held
for one period only (usually one year)
Multiple-Period Dividend Discount Model is often used in situations when an investor is expecting to buy a stock
The Gordon Growth Model also known as the divedend discount model, measures the value of a publicity traded
stock by summing the values
Analysis based on a financial metric a quick and easy way of determining the intrinsic value of a stock
Asset-based valuation the simplest way of calculating the intrinsic value of a stock

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