# 企业融资 Corporate Finance FINANCE 1122

The 6 percent coupon bond with maturity 2002 starts with 3 years left until maturity and sells for $\$ 1,010.77$. At the end of the year, the bond has only 2 years to maturity and investors demand an interest rate of 7 percent. Therefore, the value of the bond becomes $$\mathrm{PV} \text { at } 7 \%=\frac{\ 60}{(1.07)}+\frac{\ 1,060}{(1.07)^{2}}=\ 981.92$$ 证明 . You invested$\$1,010.77$. At the end of the year you receive a coupon payment of $\$ 60$and have a bond worth$\$981.92$. Your rate of return is therefore
Rate of return $=\frac{\$ 60+(\$981.92-\$ 1,010.77)}{\$1,010.77}=.0308$, or $3.08 \%$
The yield to maturity at the start of the year was $5.6$ percent. However, because interest rates rose during the year, the bond price fell and the rate of return was below the yield to maturity.

## FINANCE 1122 COURSE NOTES ：

You are now in a position to determine the value of shares in United. If investors demand a return of $r=10$ percent, then price today should be
$P_{0}=\mathrm{PV}$ (dividends from Years 1 to 3 ) $+\mathrm{PV}$ (forecast stock price in Year 3)
\begin{aligned} \mathrm{PV}(\text { dividends }) &=\frac{\ 1.00}{1.10}+\frac{\ 1.20}{1.10^{2}}+\frac{\ 1.44}{1.10^{3}}=\ 2.98 \ \mathrm{PV}\left(P_{H}\right) &=\frac{\ 30.24}{(1.10)^{3}}=\ 22.72 \ P_{0} &=\ 2.98+\ 22.72=\ 25.70 \end{aligned}