STOCK & BOND VALUATION

Review the valuation models for bonds and stocks (as well as the end of chapter discussion questions) and elaborate on the following two statements.

The relationship between a bond’s price and the yield to maturity is an inverse relationship. Explain; make sure you don’t simply restate the inverse relationship, but explain the reasoning. If you can remember and understand the “why”, you will never forget this important relationship. Examples are encouraged.
Why are stock valuation models dependent upon expected dividends, future dividend growth and an appropriate discount rate?Review how we value any financial asset which will help dissect this answer.

 

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