Archive for May, 2010
Corporate Bonds Calculator
May 20th, 2010
Question: What is the best intrinsic value calculator?
1. Current Assets - Total Liabilities (A 15 year old's no nonsense formula)
2. EPS X (8.5+2g) N
----------------------------
Y
In this formula proposed by Benjamin Graham himself, EPS is for the past 12 months, 8.5 represents the proposed P/E Ratio of a no-growth company, g is the company's estimated 5 year growth, N is the average yield of a high growth corporate bond, and Y is the current yield on AAA Corporate Bonds. Is this formula outdated, as it was introduced in 1964. But Ben Graham and Warren Buffett both class value investing as timeless, so I'm not sure what to believe.
Remember I'm only fifteen, and this investing thing is new for me... Just guide me in the correct direction...
Answer: (1) is too simplistic because it does not factor in growth for starters.
(2) doesn't make sense (unless I'm reading it wrong). In a high-interest environment, the stock and company is worth less (interest goes up, stock value should go down, except in the rare case when deflation is a big concern, such as now).
[edit] In terms stocks vs interest rate, think about how you would generally rate the following three investments:
1) AAA corporate bond paying 20%
2) Stock of a AAA-rated company
3) AAA corporate bond paying 2%
Pricing a Corporate Bond With the Texas Instruments BA-II Plus Calculator
Posted in Corporate Bonds 101 | 
Tags: business, corporate bonds calculator, derivatives, finance, investing, reference | 
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