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Bond Valuation: Preeti Jaiswal’s Dilemmas

CASELET, FINANCIAL MANAGEMENT
ET Cases, 3 pages

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Bond Valuation: Preeti Jaiswal’s Dilemmas

 

On May 1st 2015, Preeti Jaiswal (Preeti) was promoted as Junior Software Engineer at Brilliant Software Solutions Pvt. Ltd., located in Bangalore, India. Preeti had always been very enthusiastic, jubilant and inquisitive by nature. However, she had a mediocre academic track record. Interestingly, she fared very well in extracurricular activities, especially in sports. Realising her potential in sports, her badminton coach at school encouraged her to pursue sports. Due to her dedication and perseverance, she was successful in streamlining her high energy levels productively and made a mark in various national and international badminton competitions. Though her parents were quite happy with her sports track record, they were still very anxious about her low grades in academics. As she was gearing up to give engineering entrance exams, her parents were apprehensive about her ranks too. However, when the entrance results were announced, their happiness was boundless as she could gain admission into one of the premier engineering institutions in India through sports quota........

Teaching Note Preview

Bond Valuation: Preeti Jaiswal’s Dilemmas

 

Synopsis

The caselet offers interesting discussion on the bond valuation model as well as bond pricing theorems. Bond markets play a crucial role in mobilising funds from investors. These markets are prominent sources of finance, especially in developing economies like India. Though bonds are perceived as one of the important avenues which offer stable returns, they do carry certain amount of risk due to their fluctuating prices. This caselet through the dilemmas of the protagonist Preeti Jaiswal (Preeti) enables students to get the basic idea of bond valuation methods and how the interest rates impact the bond prices on a daily basis. The caselet also deals at length about various concepts such as bond types, bond yields and yield curve, etc. The caselet elucidates how the bond pricing theorems would help the bond investors in taking right decision while investing in bonds.

Prerequisite Conceptual Understanding

  • • M. Y. Khan and P. K. Jain, “Valuation of Bonds and Shares”, Financial Management, 6th Edition, McGraw Hill Education (India), 2013

 

Case Positioning and Setting

This caselet can be used for the following module/course:

  • • Valuation of Bonds and Shares chapter in Financial Management course of the MBA program – To understand how the interest rate fluctuations impact the value of the bonds as well as analyse the importance of bond pricing theorems in evaluating the various types of bonds

 

Assignment Questions

  • I. What do you understand by Bonds? What are the differences between bonds and stocks?
  • II. What is a Bond’s price? How do you value a bond?
  • III. ...............

 

Suggested Orchestration

During the Caselet Discussion in the Classroom

The discussion on the caselet was conducted under three broad related topics [Exhibit (TN)-I]. The classroom analysis of the caselet was carried out by  discussing in detail about each of the sections of the caselet. However, for each of the three sections, the discussion hovered around an ‘anchor point of discussion’. ...............

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Product code: FIN-2-0009, FIN-2-0009A

Abstract


This caselet is meant to introduce the participants/students to the concept of bond valuation. Investments in bonds being a major component of individual and institutional portfolio investments, a deeper understanding of the nuances of investing in bonds, bond price theorems including yields and Yield to Maturity (YTM), risks associated with bonds, etc., is warranted for making appropriate decisions. Preeti Jaiswal (Preeti), a young and successful software engineer was facing a dilemma of taking a mutually exclusive investment decision between the two bonds. Can the understanding of the concept help her in choosing the right option?



Pedagogical Objectives

  • To have an overview of bond valuation concepts including YTM, bond pricing theorems, etc., associated with investing in bonds
  • To understand the process of making investments in bonds and discuss on the salient caveats associated with the same

Case Positioning and Setting
This caselet can be used for the following module/course:

  • Valuation of Bonds and Shares chapter in Financial Management course of the MBA program - To understand how the interest rate fluctuations impact the value of the bonds as well as analyse the importance of bond pricing theorems in evaluating the various types of bonds



This Case Pack Includes:
- Abstract
- Caselet
- Teaching Note (**ONLY for Academicians)
$3.66
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