iv
TABLE OF CONTENTS
Unit 3: Time Value of Money
(Continued)
Discrete Discounting ............................................................... 3-22
Continuous Discounting .......................................................... 3-24
Practice Exercise 3.3 .......................................................................... 3-27
Annuities ............................................................................................... 3-31
Future Value of an Annuity...................................................... 3-31
Present Value of an Annuity.................................................... 3-32
Perpetuities .............................................................................. 3-33
Uneven Payment Streams ...................................................................3-34
Practice Exercise 3.4 ...........................................................................3-37
Unit Summary........................................................................................3-41
Progress Check 3 .................................................................................3-43
Unit 4: Valuing Financial Assets
Introduction...............................................................................................4-1
Unit Objectives ........................................................................................4-1
Bonds .......................................................................................................4-1
Bond Terminology.......................................................................4-2
Process for Issuing Bonds .........................................................4-3
Pricing Bonds..............................................................................4-4
Common Stock .......................................................................................4-7
Valuing Common Stock .............................................................4-7
Preferred Stock.....................................................................................4-11
Pricing Preferred Stock............................................................4-11
Unit Summary........................................................................................4-12
Progress Check 4 .................................................................................4-15
Unit 5: Introduction to Capital Budgeting
Introduction...............................................................................................5-1
Unit Objectives ........................................................................................5-1
Nominal and Effective Rates .................................................................5-2
Calculating Effective Interest Rates ..........................................5-2