Define the Concepts of Internal and External Equity,describing Two Basic

question 16

Essay

Define the concepts of internal and external equity,describing two basic models a company may use,and explain how the objectives of internal and external equity can conflict.

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Definitions:

Quoted Price

The last price at which a security or commodity was traded and is publicly available.

Par Value

The face value of a bond or stock as stated by the issuer, which has implications for interest calculations or dividends.

Yield to Maturity

Yield to Maturity (YTM) is the total return anticipated on a bond if the bond is held until it matures, considering all payments from now until maturity, including coupon payments and the difference between the purchase price and the par value.

Coupon Rate

The annual interest rate paid on a bond, expressed as a percentage of the face value, to the bondholders.