Week 4: Valuing Stocks and Bonds
Suppose you are working for a medium-sized company as a senior finance manager. You have been working for the same company for almost 10 years now, and have worked your way up the corporate ladder. Your company is planning for big growth and needs money for that. It does not want to invest the money it already has; rather it wants to raise money from the market. The critical decision is whether to raise the money through bonds or stocks or a combination of both.
Your company has formed an executive decision-making team to address the money-raising issues. You are a member of the team. How will you and your team decide on how to raise the money? What factors do you need to evaluate to make the decision? What questions do you need to ask and seek answers for? Can you put yourself in the shoes of a buyer in the market and consider how he or she may make decisions about investing in bonds or stocks?
This week, you explore bonds and stocks. You also examine various factors associated with offering and buying bonds and stocks. Finally, you complete a quiz to assess your knowledge of the content covered this week.
- Explain bond features
- Explain why bond prices fluctuate with interest rates
- Evaluate stocks and bonds as options for personal investment
- Explain how stock prices depend on future dividends
- Analyze financial research findings
- Identify concepts of financial management related to stocks and bonds
Photo Credit: [Henrik5000]/[E+]/Getty Images
Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2017).
Essentials of corporate finance (9th ed.). New York, NY: McGraw-Hill Irwin.
- Chapter 6, “Interest Rates and Bond Valuation” (pp. 165-154)
- Chapter 7, “Equity Markets and Stock Valuation” (pp. 205-228)
Document: Week 4 Assignment Template (Word document)
Document: Week 4 Discussion Template (Word document)
Laureate Education (Producer). (2014a).
Bonds. [Interactive media]. Baltimore, MD: Author.
Discussion: Valuing Stocks and Bonds
Understanding stocks and bonds and how each is valued is paramount to being a perceptive investor. Bonds are less risky than stocks as they are a loan that must be paid back by the borrower. Interest rates will determine to a great degree the value of a bond. Stocks are more risky as many factors such as earnings, revenue, market sentiment, growth prospects, and other factors will determine what a stock is worth. As a financial manager or an investor, a thorough understanding of bonds and stocks will help you to make sound financial decisions both for your organization as well as for your personal reasons.
For this Discussion, select a bond feature, and consider why it is important. Also, consider if the bond feature adds value to either the investor or the issuer. Finally, consider and review the concept of yield-to-maturity and its importance to valuing a bond.
By Day 3
Post a 200- to 250-word statement that identifies the bond feature you selected. Explain the feature in detail and explain the importance of yield-to-maturity. In addition, explain stocks and preferred stocks. Finally, explain why you would, as a personal investor, invest or not invest in stocks or bonds. Justify your rationale.
Be sure to support your work with specific citations from the Learning Resources and any additional sources.
Read a selection of your colleagues’ postings.
By Day 6
Response to two or more of your colleagues’ postings in one or more of the following ways:
- Ask a probing question.
- Share an insight from having read your colleague’s posting.
- Offer and support an opinion.
- Validate an idea with your own experience.
- Make a suggestion.
- Expand on your colleague’s posting.
Return to this Discussion in a few days to read the responses to your initial posting. Note what you learned and the insights you gained as a result of your colleagues’ comments.
Note: Refer to the Discussion Template in this week’s Learning Resources for your main post and response.
Submission and Grading Information
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Week 4 Discussion Rubric
Post by Day 3 and Respond by Day 6
To participate in this Discussion:
Week 4 Discussion
Assignment: Analyzing Financial Research Findings
Research findings are very important because they provide you with knowledge that has been validated. As a financial manager, financial research findings can help you in your managerial decision-making.
For this Assignment, locate a current research article about finance by researching the Internet and the Walden Library databases. Feel free to discuss any topic in the world of finance, even if it has not been covered in the course so far. Finance is a very broad topic. Therefore, you can write on many topics, such as a particular company’s financial performance, understanding various financial statements, investment strategies, mutual funds, hedge funds, private equity, mergers and acquisitions, bonds, the stock exchanges, recent changes in accounting laws, tax law changes that affect investing, technology in finance (i.e. electronic trading, etc.), and many other areas. You can also choose topics on international finance, international economic events (interest rates, currencies, inflation, etc.), economic policies, and other areas, because these topics are closely related and tie into finance. If you have a topic that you are not sure about that interests you, reach out to your Instructor to find out if it is acceptable.
By Day 7
Submit a 500- to 800-word report that analyzes your selected article. Be sure to address all of the following:
- Briefly summarize the article.
- Explain what you have learned.
- Explain what you found to be most interesting and why.
- Explain whether you agreed or disagreed with the viewpoints presented. Justify your rationale.
- Relate the information to financial aspects in your personal and professional life.
- Explain how the information in your article can be of used by a financial manager.
A title page and executive summary is not required.
Note: Refer to the Assignment Template in the Learning Resources.
Submission and Grading Information
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- Click the Week 4 Assignment Rubric to review the Grading Criteria for the Assignment.
- Click the Week 4 Assignment link. You will also be able to “View Rubric” for grading criteria from this area.
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