FINA 3724 notes
FINA 3724 notes FINA 3724
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This 2 page Class Notes was uploaded by Lindsay Taylor on Tuesday March 29, 2016. The Class Notes belongs to FINA 3724 at East Carolina University taught by Matthew Walker in Winter 2016. Since its upload, it has received 44 views. For similar materials see Fundamentals of Financial Management in Finance at East Carolina University.
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Date Created: 03/29/16
FINA 3724 NOTES FOR WEEK OF MARCH 21 . Bond Calculations FV: par or face value PMT: coupon rate I/Y: Yield to maturity; rate you earn N: maturity date; time till bond matures PV: purchase price; selling price Par: YTM = Coupon rate Discount: YTM > coupon rate Premium: YTM < coupon rate Standard deviation ( σ ) 1σ = 68% 2σ = 95% 3σ = 99.7% (CAPM) Capital Asset Pricing Model Return SML RFR Risk Total Risk = Systematic + Unsystematic Systematic: Beta, market risk, undiversifiable, can’t get rid of Unsystematic: diversifiable, business risk, can reduce • Beta only matters when adding stocks to a portfolio FINA 3724 NOTES FOR WEEK OF MARCH 21 . Lower systematic risk between 25-‐40 stocks; past 30 adding stocks is negligible in the difference it makes to your unsystematic risk Beta of 1 = avg risk of the avg risk of the market Lower beta = lower market risk Lower standard deviation= lower stand alone risk Price at time 0 = Div 1 / r-‐g r = required return, g = constant growth rate FCF= EBIT x (1 – T) + depreciation – capital expenditures -‐ Δ NOWC FCF free cash flow NOWC net operating working capital Preferred stock-‐ guaranteed payment (fixed); no voting rights; like a perpetuity Cash flows furthest away will have greatest change with a change in interest rate
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