If your company needs to raise some cash and has determined that issuing stock isn’t in its best interests, you might borrow money by issuing bonds. In essence, you’re betting that you can earn a higher rate of return than you pledge to pay bondholders. Once you know the parameters of the bond you’d like to issue, you can use the PRICE function to find the break-even issue price.
- [Instructor] If your company needs to raise some cash…and has determined 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 are betting that you can…earn a higher rate of return on the borrowed money…than you pledge to pay your bond holders.…Once you have the parameters of the bond you'd like to issue…you can use the Price function…to find the break even issue price.…I'll demonstrate how to perform this calculation.…My sample file is BondPrice_05_04,…and you can find it in the Chapter 5 folder…of the Exercise Files collection.…
To calculate a bond price,…you need to know several bits of information.…The first is the Settlement Date, and that is…the date that the investor…will take possession of the security.…Next is the Maturity Date,…and that is the date that the investment will end.…And you return…the principal plus any accumulated interest to the investor.…Next is Percent Coupon,…and that is the amount of interest that you pay…
- Analyzing loans, payments, and interest
- Calculating depreciation
- Determining values and rates of return
- Calculating bond coupon dates and security durations
- Calculating security prices and yields
- Calculating prices and yields of securities with odd periods
- Analyzing simulation results
Skill Level Intermediate
1. Analyzing Loans, Payments, and Interest
2. Calculating Depreciation
3. Determining Values and Rates of Return
4. Calculating Bond Coupon Dates and Security Durations
5. Calculating Security Prices and Yields
6. Analyzing Simulation Results
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