I-16
CONTENTS PAGE
Multiple choice questions
24
Assignments
25
2
THE MATHEMATICS OF FINANCE
u Concept and relevance
28
u Compounding technique
29
u Discounting technique
33
u Applications of the concept of TVM
38
STUDENTS ACTIVITIES
42
Points to remember
42
Graded illustrations
43
Objective type questions
45
Multiple choice questions
46
Assignments
47
Problems
47
PART II : VALUATION AND RISK MANAGEMENT 3
VALUATION OF SECURITIES
u Concept of Valuation
51
u Required Rate of Return
52
u Basic Valuation Model
53
u Bond Valuation
53
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Bond Value in case of Semi-Annual Interest
56
u Yield to Maturity (YTM)
57
u Interaction between Bond Value and the Interest Rate
58
u Valuation of Convertible Debentures
58
u Valuation of Deep Discount Bonds (DDB)
59
u Valuation of Preference Shares
60
u Valuation of Equity Shares
61
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Valuation of Equity Shares based on Accounting Information
61
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Valuation of Equity Shares based on Dividends
62
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Valuation of the Share Currently not paying Dividends
66
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Valuation of Equity Shares based on Earnings
66
u Risk-return Dimension, Share Valuation and Financial Decision making
69
u Valuation of Other Financial Assets
71
STUDENTS ACTIVITIES
71
Points to remember
71
Graded illustrations
71
Objective type questions
78
Multiple choice questions
78
Assignments
80
Problems
81
