金融学概论讲义(北大光华管理学院)lecture02.doc

Principles of Finance Lecture 02 Bond and Share Valuation Objectives To apply the ideas of discounting and present value: ( Bond features and prices ( Bond yields ( Share valuation using dividend discounting models ( Return, yield, growth, and price/earnings ratios Valuing Multiperiod Cash Flows ( and Valuing Multiperiod Cash Flows Valuing Multiperiod Cash Flows Valuing Multiperiod Cash Flows If you invest $15,000 for 10 years, you receive $30,000. What is your annual rate of return? Valuing Multiperiod Cash Flows Perpetuity ( A stream of cash flows that lasts forever ( Valuing a level perpetuity ( Perpetuity ( Valuing a growing perpetuity Annuity ( A stream of cash flows that lasts for a fixed number of years ( Valuing an (ordinary) annuity Assumptions of Ordinary Annuity The first cash flow occurs exactly one period from now All subsequent cash flows are separated by exactly one period All periods are of equal length All cash flows have the same nominal value The term structure of interest rate is flat Present Value of Annuity PV of Annuity ( PV of Perpetuity Starting at time 1 ( Perpetuity Starting at time t+1 Present Value of Annuity Present Value of Annuity Example of Annuity Choice 1: Lease a car for 4 years at ￡300 per month Choice 2: Buy the car at ￡18,000 and you can sell it at the end of 4 years at ￡6,000 If the cost of capital is 0.5% per month with monthly compounding, which one is the better deal? Answer: Pure Discount Bonds ( A pure discount (zero-coupon) bond is a security that promises to pay a specified single cash payment (face value or par value) at its maturity date ( We can always disaggregate any fixed income security into sum of pure discount bonds ( Example of pure discount bond: A one-year pure discount bond with par value of ￡1,000 is trading at ￡950, at its ma