Republic of uzbekistan ministry of higher education, science and innovations
Bond price = 0 / (1+12%) + 0 / (1+12%)
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- Nominal Value in Economics
Bond price = $100 / (1+12%) + $100 / (1+12%)2 + $100 / (1+12%)3 + $1000 / (1+12%)3
Bond price = $89.29 + $79.72 + $71.18 + $711.79 = $951.98 Nominal Value of Stocks The nominal value of a company's stock, or par value, is an arbitrary value assigned for balance sheet purposes when the company is issuing share capital – and is typically $1 or less. It has little to no bearing on the stock's market price. For example, if a company obtains authorization to raise $5 million and its stock has a par value of $1, it may issue and sell up to 5 million shares of stock. The difference between the par and the sale price of stock is called the share premium and may be considerable, but it is not technically included in share capital or capped by authorized capital limits. So, if the stock sells for $10, $5 million will be recorded as paid share capital, while $45 million will be treated as additional paid in capital. Preferred stocks are hybrid assets which pay dividends and may be converted to common stock. The nominal (par) value is quite important here as this is the amount used to calculate the dividend. For example, a company issuing a 5% preferred stock with a par (nominal) value of $50 would be paying dividends of $2.50 (5% *$50) per share annually. The preferred stock's price will depend on the market's assessment of the dividend percentage being offered, in this case 5%. If the market is satisfied with 5% then the stock will trade around its nominal (par) value. If the dividend percentage is higher or lower than market expectations then the preferred stock's price will trade at a higher or lower price than its nominal value. Nominal Value in Economics In economics, nominal value refers to the current monetary value and does not adjust for the effects of inflation. This renders nominal value a bit useless when comparing values over time. It is for this reason that investors prefer real values, which factor in inflation, to give a relative comparison that is more accurate and understandable. Real rate is the nominal rate minus the inflation rate. Download 93.5 Kb. Do'stlaringiz bilan baham: |
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