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Excel 2007: Financial Analysis

Pricing bonds to be offered to investors


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Excel 2007: Financial Analysis

with Curt Frye

Video: Pricing bonds to be offered to investors

If your company needs to raise some cash and has determined that that issuing stock isn't in its best interest, you might borrow money by issuing bonds. Pricing bonds for sale is a tricky business. In essence, you're betting that you can earn a higher rate of return on the borrowed money than you pledged to pay bondholders. Once you know the parameters of the bond you would like to issue, you can use the PRICE function to find the break-even issue price. To do that you use the PRICE function, which has seven arguments, Settlement Date, Maturity Date, Percent Coupon which is the interest rate, percent Yield, Redemption Value, Frequency, and Basis.
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  1. 2m 6s
    1. Welcome
      1m 8s
    2. Using the exercise files
      32s
    3. Disclaimer
      26s
  2. 13m 20s
    1. Separating inputs and formulas
      2m 2s
    2. Avoiding common mistakes
      5m 39s
    3. Tracing formula precedents and dependents
      2m 52s
    4. Evaluating Excel formulas step by step
      2m 47s
  3. 18m 40s
    1. Tracking income and expenses using an Excel table
      3m 29s
    2. Creating a Pivot Table from table data
      3m 36s
    3. Pivoting a Pivot Table
      2m 22s
    4. Filtering a Pivot Table
      3m 11s
    5. Adding Pivot Table columns to enhance data analysis
      3m 5s
    6. Tracking cash flow using a Pivot Chart
      2m 57s
  4. 18m 48s
    1. Reading a corporate financial statement
      6m 1s
    2. Introducing common-sizing strategies for analyzing financial statements
      3m 59s
    3. Creating common-sized income statements
      3m 1s
    4. Creating common-sized balance sheets
      2m 53s
    5. Calculating percentage changes in financial statements
      2m 54s
  5. 8m 12s
    1. Calculating earnings per share
      1m 54s
    2. Calculating return on equity and return on assets
      2m 50s
    3. Calculating gross profit margin and net profit margin
      3m 28s
  6. 6m 19s
    1. Calculating the current ratio and quick ratio
      2m 47s
    2. Calculating the average collection period
      1m 56s
    3. Calculating inventory turnover
      1m 36s
  7. 6m 12s
    1. Calculating the equity ratio
      1m 26s
    2. Calculating the debt ratio
      2m 57s
    3. Calculating the times interest earned ratio
      1m 49s
  8. 10m 58s
    1. Calculating simple interest and compound interest
      3m 36s
    2. Applying nominal versus effective interest rates (APR versus APY)
      3m 21s
    3. Calculating the number of days between events
      4m 1s
  9. 13m 32s
    1. Computing the future value of an investment
      3m 30s
    2. Calculating present value
      2m 29s
    3. Calculating net present value
      2m 42s
    4. Calculating internal rate of return
      2m 24s
    5. Calculating NPV and IRR for uneven input periods (XNPV and XIRR)
      2m 27s
  10. 7m 30s
    1. Projecting future results using the Forecast function
      2m 9s
    2. Performing quick forecasts using the Fill handle
      2m 57s
    3. Adding a trendline to a chart
      2m 24s
  11. 22m 28s
    1. Introducing amortization
      2m 20s
    2. Calculating payments on a fully amortized loan
      2m 21s
    3. Calculating payments on a partially amortized loan (balloon payments)
      2m 4s
    4. Calculating interest and principal components of loan repayments
      5m 32s
    5. Introducing depreciation
      2m 1s
    6. Calculating straight line depreciation
      1m 30s
    7. Calculating declining balance depreciation
      3m 24s
    8. Calculating double declining balance depreciation
      3m 16s
  12. 9m 34s
    1. Introducing bonds and bond terminology
      1m 37s
    2. Calculating a bond's yield
      2m 15s
    3. Calculating the value of zero coupon bonds
      3m 18s
    4. Pricing bonds to be offered to investors
      2m 24s
  13. 23s
    1. Goodbye
      23s

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Excel 2007: Financial Analysis
2h 18m Intermediate Aug 25, 2009

Viewers: in countries Watching now:

Numbers and financial data drives today's business world and Excel 2007: Financial Analysis can help decode this information. The proper understanding of these numbers, and the formulas behind them, can be the gateway to corporate and personal success. Microsoft MVP (Most Valuable Professional) Curt Frye teaches basic fluency in corporate finance, enabling users to see the meaning behind essential financial calculations. Curt explains how to review formulas to ensure they have the proper inputs, and shows how to interpret formula output. He also covers how to calculate leverage ratios and amortization and depreciation schedules, as well as forecast future growth. Exercise files accompany this course.

Topics include:
  • Building a financial worksheet with Pivot Tables Reviewing financial statements through common-sized balance sheets Calculating percentage change over time in financial statements Determining profitability ratios and return on investments Studying liquidity and activity ratios through an average collection period Computing the future value of an investment
Subjects:
Business Data Analysis Finance
Software:
Excel
Author:
Curt Frye

Pricing bonds to be offered to investors

If your company needs to raise some cash and has determined that that issuing stock isn't in its best interest, you might borrow money by issuing bonds. Pricing bonds for sale is a tricky business. In essence, you're betting that you can earn a higher rate of return on the borrowed money than you pledged to pay bondholders. Once you know the parameters of the bond you would like to issue, you can use the PRICE function to find the break-even issue price. To do that you use the PRICE function, which has seven arguments, Settlement Date, Maturity Date, Percent Coupon which is the interest rate, percent Yield, Redemption Value, Frequency, and Basis.

The Settlement Date is the date you gain ownership of the security. The Settlement Date is the date that a buyer gains ownership of the security. That date will probably be different from the bonds issuance date, which is the date the bond was made available for sale. The Maturity Date is the date the bond will be paid off. So we've a Settlement Date in cell B3 and a Maturity Date in cell B4. Percent Coupon is the bond's interest rate. Yield is the bond's annual yield and Redemption is the bond's redemption value per $100 of face value, most commonly that's $100.

And Frequency is the number of interest or coupon payments per year. So we've the rate or Percent Coupon in cell B5, the Yield in cell B6, the Redemption Value in B7 and the Frequency in B8. Basis reflects the way you count the days of the year. The western calendar can have months of 28, 29, 30, or 31 days and years of either 365 or 366 days. So many investments base their calculations on a year that is presumed to have 12 months of 30 days each for a 360-day year.

The Excel help system describes the other options available including the European 30-360 system, which is slightly different from the US system. So I'll just type in B9, close out the formula and there we have a result. The break-even issuance price given the parameters stated would be $90.36. Like the YIELD function, the PRICE function assumes bondholders always reinvest their interest and that the bond's interest rate never changes. Those assumptions are rarely true. But the PRICE function offers a good first look at what you should charge your bondholders with the goal of making a profit on the transaction.

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