Bond valuation and yielder What do they mean, and how you derive their values Consider the following case of investment-grade bonds issued by Procter & Gamble Co. (PRG) in August 2011 Procter Gamble (NYSE: PS) Issue Details Issue Sire (SMI) Maturity Date Callable $1,000 01/15/2014 Yes Coupon Coupon Type Coupon Frequency 0.700% Feed Semi-annually Historical Treasury Rates Rate (4) win On A 20 Time Period Source: US Department of the contar.com : Procter and Gamble's total amount of debt increased from 31.05 in March 2011 to 342 in December 2011, indoton debeancest fund oneral corporate purposes. point What was the annual cost of the Fundraised from the $1.0 billion bonds that mature in 2004 to PACT 1 the bond sold at $100.10 at the time of issue, investors quired annual yieit would be Looking at the comparable U.S. Treasury yield, these bonds were issued at a spread of des points Because the coupon rates the yield required by the market, the bond toitat Ir the new served yield of the bond is 1.2%, the bond as they to be trading at a price ora Note: Round your answer to trade places) vw the time of less than they of the current yield is higher than the coupon rate, mest would want a higher return on the went required by the market, the price of the hond is mostly to be the power hand, and the end Thus, when they As interest rates increase the yield required by the main and the body caseta 1.2%, the band's price Dy (Note: Round your attem) Understanding yield to call and when bonds are called Suppose the bond had a call structure that allowed the company to call its bonds after one year. The cal structure of the bonds states that the bonds would be collable at par What would be the yield to call? O 2.189% O 1.4879 O 0.765 O 1.448% In what situation would the company call the bond? O When interest rates rise When the bond's price rises When Interest rates fall When current yield on the bonds falls From an investor's perspective of the investor holds these PAG bonds in their portfolio and market interest rates rise, the bonds' value in the fixed- Income asset class in the portfolio wil most likely but if market interest rate fall, the value of bonds in the portfolio will