Assignment Objectives:

The purpose of this assignment for the student is:

• Use information technology to complete academic writing and research.
  • Present written information in a persuasive, organized, clear, and concise manner relying on research, data, and analytics.
  • Use acceptable paragraph and sentence structure with minimum grammar, punctuation, and spelling errors; and demonstrate appropriate word choice, tone, and format.
• Explain how the time value of money works and discuss why it is such an important concept in finance.
  • Identify the different types of annuities, calculate the present value and future value of both an ordinary annuity and an annuity due, and calculate the relevant annuity payments.
  • Explain what the yield curve is, what determines its shape, and how the yield curve can be used to help forecast future interest rates.

Topic

Create a valuation model for a new issuance of $100 million dollar corporate bonds with a face value of par. Include numerical illustrations with tables. Remember the valuation model is hypothetical.

The following questions to be answered in your report:

1. Develop and present a valuation model for corporate debt with a face value of $100 million dollars. The model should use hypothetical assumptions for the coupon rate and other characteristics as well as a hypothetical market interest rate. You must also select a maturity for the bonds and the frequency of the coupon payments. The market rate should be justifiable/reasonable given current market conditions. Explain why the model will be important for the issuance process that is being considered.

2. Explain the possible determinants of the market interest rate that you chose. For example, you should explain how the inflation rate in the economy could be expected to impact the market rate that you chose.

3. Explain how the market rate you chose will be dependent upon the maturity. Describe what you believe to be the most persuasive theory associated with the shape of market interest rates across the maturity spectrum (i.e., the yield curve).

4. Comment on how the different bond characteristics would influence the valuation of the bond. Provide illustrations in a summary table format for how the value might adjust for call provisions and sinking funds.

Requirements of the assignment:

• All papers must follow all APA requirements including an abstract.
• Body of the paper 5 -7 pages, no more or less
• Title page, abstract, and reference pages are required. However, they do not count towards any page count.
• Writing should reflect an understanding of the chapters basic concepts, thorough research, and logic and critical thinking skills.
• The introduction is attention getting with sufficient background information to establish the topic and a clear thesis statement.
• The conclusion summarizes the main points and leaves the reader with a strong comprehension of the papers significance and the authors understanding.
• Do not use the first person.