Valuation of Financial Instruments

Write 500–600 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas.

The third of the primary principles of finance is known as valuation. This principle brings together the two other principles that were studied earlier: the time value of money and risk and return.

In your initial post, identify and recommend at least 1 credible Web site that an investor can visit to find the current market value of stocks and bonds being traded, and address at least 3 of the following:

  • What is the concept of valuation, and how does it incorporate the time value of money and the risk of return principles?
  • What is the bond, and what are the variables that are required to calculate the current market were present value of a bond?
  • What are the 2 cash flows that are generally associated with bonds, and why is the present value of these cash flows less than the future value of these cash flows?
  • Discuss the conditions where a bond would trade at par, a discount, and at a premium.
  • Describe the various methods of estimating the value of common stock and their weaknesses.
  • Discuss the primary differences between preferred and common stock?

Be sure to document your posts with in-text citations, credible sources, and properly listed (3) references.

Objective: Apply the time value of money in making financial decisions.Determine the relationship between risk and return by calculating stock and portfolio variance.Apply valuation formulas to assess the value of stocks and bonds.Use effective communication, team and problem-solving skills to collaborate on a project.

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