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Topic: Growth Models 7D: Cash Flows Associated With A Bond
Provide a half page single spaced response to each of the following questions. Cite two sources (APA) for each question and indicate for which question the source was used. No Title Page required
oWhat are the cash flows associated with a bond? What are important bond features and why do values and yields fluctuate?
o Explain the difference between a perpetuity (zero growth model), constant growth model and a non-constant growth model in valuing stocks.
Growth Models 7D
Cash flows associated with a bond
Bonds are a corporate security that signifies debt of the corporation. They can be easily valued by calculating the present value of the bonds future interest payments and the bond value upon maturity. The cash flows linked with bonds are the coupon payments on the bond every coupon period and the face value or maturity value of the bond. The coupon payments are the periodic payments on a bond that are paid semi yearly. Conversely, face value is the amount to be paid back at maturity. The market value of a bond is the present value of the anticipa