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.
- [Voiceover] If a company needs to raise cash,…and has determined that selling stock…isn't in its best interest,…it can also 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,…then you pledge to pay bond holders.…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.…I'll show you how to perform that calculation in Excel…using the Bond price 0504 workbook,…that you can find in the chapter five folder…of your exercise files collection.…
To calculate the price of a bond,…you need to first set the parameters…that you'll use in the calculation,…and those are in cells B3 through B9.…First is the settlement date,…that's the date that the bond will be issued to purchasers.…Next is the maturity date,…and that is the date that the bond will come due.…And you have to return the investor's principal…plus any interest that they've earned.…
- 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
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. Calculating Prices and Yields of Securities with Odd Periods
Additional resources1m 24s
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