Week 4 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.

Post by Day 3, 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.

Respond by Day 6 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.
• 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 from the comments your colleagues made.

Note: Refer to the Discussion Template in this week’s Learning Resources for your main post and response

Week 4 Learning Resources

This page contains the Learning Resources for this week. Be sure to scroll down the page to see all of this week’s assigned Learning Resources.

Required Resources

Readings

• Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2012). Essentials of corporate finance (8th ed.). New York, NY: McGraw-Hill/Irwin.
  • Chapter 6, “Interest Rates and Bond Valuation” (pp. 166–206)
  • Chapter 7, “Equity Markets and Stock Valuation” (pp. 207–237)