Bonds can be purchased at any time. To value the bond, the procedures differ depending on whether the bond is purchased on the date interest is regularly paid (interest date) or whether it is purchased “between interest dates”. How to calculate the Purchase Price of a Bond on an Interest Date Formula to be used: … Continue reading Bond Valuation — Calculation
Category: Finance
Finance is the study of how individuals, businesses, and organizations manage money and investments. Our resources provide expert insights into a range of financial topics, including personal finance, corporate finance, and financial markets. With our help, you can develop the skills and knowledge you need to make informed decisions about investing, budgeting, and managing your finances for long-term financial health.
Capital Budgeting – Procedure & Decision Process
Capital budgeting is the process by which the financial manager decides whether to invest in specific capital projects or assets. In some situations, the process may entail in acquiring assets that are completely new to the firm. In other situations, it may mean replacing an existing obsolete asset to maintain efficiency. During the capital budgeting … Continue reading Capital Budgeting – Procedure & Decision Process
Cost of Capital WACC — Formula & Calculation
The cost of capital is the expected return that is required on investments to compensate you for the required risk. It represents the discount rate that should be used for capital budgeting calculations. The cost of capital is generally calculated on a weighted average basis (WACC). It is alternatively referred to as the opportunity cost … Continue reading Cost of Capital WACC — Formula & Calculation
CAPM – Capital Asset Pricing Model
In an efficient securities market, prices of securities, such as stocks, always fully reflect all publicly available information. This raises the question “What should the price be?” The well-known Sharpe-Lintner capital asset pricing model (CAPM) provides an answer. According to the model a share’s current market price will be such that: Expected return on the … Continue reading CAPM – Capital Asset Pricing Model
Present Value – Formula & Calculation
Present value refers to today’s value of a future amount. Present Value Formula: S P = ———— (1+rt) Instead of beginning with the principal which is invested, you could start from what you want to accumulate in the future, and then work backward to see the amount that you must invest to reach the required … Continue reading Present Value – Formula & Calculation
Efficient Markets Hypothesis – Theory & Definition
Definition An efficient securities market is one where the prices of securities traded on that market at all times “properly reflect” all information that is publicly known about those securities. Noteworthy Points of the Theory First, market prices are efficient with respect to publicly known information. The possibility, therefore, of inside information is not ruled … Continue reading Efficient Markets Hypothesis – Theory & Definition
Calculating Compound Interest
Compound interest means that the interest will include interest calculated on interest. For example, if an amount of $5,000 is invested for two years and the interest rate is 10%, compounded yearly: • At the end of the first year the interest would be ($5,000 * 0.10) or $500 • In the second year the … Continue reading Calculating Compound Interest
Simple Interest – Definition and Calculation
When we borrow money we are expected to pay for using it – this is called interest. There are three components to calculate simple interest: principal (the amount of money borrowed), interest rate and time. Formula for calculating simple interest: I = Prt Where, I = interest P = principal r = interest rate (per … Continue reading Simple Interest – Definition and Calculation
Understanding Market Volatility
Volatility is a good thing Conventional, conservative investment advisors hold that your stock investments should be steady, and show gradual but reliable and predictable increases over time. And indeed, if you are building for retirement, these are the types of stocks to buy. There are however, two broad types of stock market investment strategies. The … Continue reading Understanding Market Volatility