Part One Quantitative Exercises In This Part Of The Assignme

Part One Quantitative Exercisesin This Part Of the Assignment You Wi

Part One: Quantitative Exercises in this part of the assignment, you will: determine the value of stocks, including preferred and common stocks; estimate the value of stocks with high growth, and then estimate the value of stocks with constant growth; analyze the components of stock valuation models; evaluate the value of bonds paying annual and semiannual interest; and determine the yield to maturity of bonds with annual and semiannual payments. Use the provided Week 3 quantitative exercises template (FIN2030_W3_A2_Template.xlsx) to complete these tasks, employing formulas in Excel or a financial calculator. Clearly summarize your results with embedded formulas, mathematical equations, or steps taken on the calculator.

Part Two: Final Project 2 -- Portfolio Analysis

Part A: Research Online Trading Sites and DRIPs

In this segment, you will evaluate online brokerage accounts—examining requirements such as costs, minimum balances, and features—by researching three online trading sites. For each, determine the trading requirements and fees, including price per trade. Additionally, research three companies that offer dividend reinvestment plans (DIPs or DRIPs), analyzing their requirements, minimum investments, return structures, costs, and features. Summarize your findings, including a comparison table highlighting key information. This analysis should be presented in 2–3 pages for online trading sites and 1–2 pages for DIPs and DRIPs.

Part B: Research Market Data on Bonds

Research recent market data (within the past two months) for bonds issued by AT&T, Dell, and IBM, assuming a par value of $1,000 unless otherwise specified. Use the following bond information for calculations:

  • AT&T: Coupon 6.80%, Maturity 26 years, Rating A, with a required return of 5%
  • Dell: Coupon 6.50%, Maturity 27 years, Rating A-, with a required return of 6.5%
  • IBM: Coupon 8.40%, Maturity 9 years, Rating A+, with a required return of 8%

Calculate the present value of each bond based on the specified required return rates. Determine the yield to maturity (YTM) for each bond based on their current market prices. Furthermore, analyze and rank these bonds in terms of risk and return, considering their ratings and YTM calculations. Provide explanations for your rankings based on the bond ratings and YTM results.

Summary

This assignment encompasses a comprehensive analysis of stock and bond valuation, as well as an investigation into online trading platforms and dividend reinvestment options. The quantitative exercises will reinforce understanding of fundamental valuation techniques, including models for stocks with varying growth expectations and bonds with different maturities and ratings. The research on online brokers and DRIPs further enhances practical knowledge of investment avenues and strategies, aiding in making informed investment decisions.

References

  • Fabozzi, F. J. (2016). Bond Markets, Analysis and Strategies (9th ed.). Pearson Education.
  • Ross, S. A., Westerfield, R. W., & Jaffe, J. (2019). Corporate Finance (12th ed.). McGraw-Hill Education.
  • Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of Corporate Finance (13th ed.). McGraw-Hill Education.
  • Investopedia. (2023). Dividend Reinvestment Plans (DRIPs). https://www.investopedia.com
  • Morningstar. (2023). Bond Ratings and Yields. https://www.morningstar.com
  • SEC. (2023). Understanding Bond Ratings. https://www.sec.gov
  • U.S. Securities and Exchange Commission. (2023). Online Brokerages. https://www.sec.gov
  • Yahoo Finance. (2023). Market Data for Bonds. https://finance.yahoo.com
  • Charles Schwab. (2023). Online Brokerage Requirements. https://www.schwab.com
  • Fidelity Investments. (2023). Investment Options and Services. https://www.fidelity.com

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