Valuations & TVM

Valuations are subjective/involve judgement.

• True

• False

How do you calculate the value of a non-redeemable preference share?

• PV of the annuity payment

• FV of the annuity payment

• PV of the perpetuity payment

• FV of the perpetuity payment

How do you calculate the value of a redeemable bond?

• PV of the annuity payment

• FV of the annuity payment

• PV of the perpetuity payment

• FV of the perpetuity payment

A redeemable pref share carries annual dividend payments. The market rate is a monthly compounded rate. Select all answers that apply when calculating the PV of this pref share.

• N- months

• N-annual

• I/Y- monthly

• I/Y- effective annual

A non-redeemable bond carries monthly interest payments of R10. The market interest rate is an effective rate of 12% based on monthly compounding. Select all that apply when calculating the PV of the bond.

• PMT = 10 x 12

• PMT = 10

• I/Y = 12%

• I/Y= (12% converted to nominal) / 12

• I/Y = 12%/12