Question
Bond Valuation Problems -Directions: Instructions: Solve the following problems, reflecting the entire procedure with the following formulas as applied to the problem: USE THE TABLES
Bond Valuation Problems
-Directions: Instructions: Solve the following problems, reflecting the entire procedure with the following formulas as applied to the problem:
USE THE TABLES TO FIND THE MULTIPLIER.
- V= I/m x [PVIF(A)kd%/m, n/m] + M x [PVIF kd%/m, n/m]
- V= I/m (Multiplicador T. 4) + Par Value (Multiplicador T. 2)
Bond value = PV of interest + PV of MV
Bond value = PV annuity + PV of par value-lump sum
Where:
V = value of a bond
I = annual interest =Coupon Int Rate X Par Value
n = years to maturity
m = how many times are interests computed on a year
M = dollar par value
kd = required return on the bond (market interest rates for new comparable bonds)
TABLE 2 Present Value Factors (SIMPLE) PV = FV (PVIF)
Periods 1 % 2 %3 % 4 % 5 % 6 % 7 |
1 .9901 .9804 .9709 .9615 .9524 .9434 .9346 |
2 .9803 .9612 .9426 .9246 .9070 .8900 .8734 |
3 .9707 .9423 .9151 .8890 .8638 .8396 .8163 |
4 .9610 .9238 .8885 .8548 .8227 .7921 .7629 |
5 .9515 .9057 .8626 .8219 .7835 .7473 .7130 |
6 .9420 .8880 .8375 .7903 .7462 .7050 .6663 |
7 .9327 .8706 .8131 .7599 .7107 .6651 .6228 |
8 .9235 .8535 .7894 .7307 .6768 .6274 .5820 |
9 .9143 .8368 .7664 .7026 .6446 .5919 .5439 |
10 .9053 .8203 .7441 .6756 .6139 .5584 .5083 |
11 .8963 .8043 .7224 .6496 .5847 .5268 .4751 |
12 .8874 .7885 .7014 .6246 .5568 .4970 .4440 |
13 .8787 .7730 .6810 .6006 .5303 .4688 .4150 |
14 .8700 .7579 .6611 .5775 .5051 .4423 .3878 |
15 .8613 .7430 .6419 .5553 .4810 .4173 .3624 |
16 .8528 .7284 .6232 .5339 .4581 .3936 .3387 |
17 .8444 .7142 .6050 .5134 .4363 .3714 .3166 |
18 .8360 .7002 .5874 .4936 .4155 .3503 .2959 |
19 .8277 .6864 .5703 .4746 .3957 .3305 .2765 |
20 .8195 .6730 .5537 .4564 .3769 .3118 .2584 |
21 .8114 .6598 .5375 .4388 .3589 .2942 .2415 |
22 .8034 .6468 .5219 .4220 .3419 .2775 .2257 |
23 .7954 .6342 .5067 .4057 .3256 .2618 .2109 |
24 .7876 .6217 .4919 .3901 .3101 .2470 .1971 |
TABLE 4 Present Value Of Annuity Factors PV(A)o= Annuity [PVIF(A)]
Periods 1 % 2 % 3 % 4 % 5 % 6 % 7 % |
1 .9901 .9804 .9709 .9615 .9524 .9434 .9346 |
2 1.9704 1.9416 1.9135 1.8861 1.8594 1.8334 1.8080 |
3 2.9410 2.8839 2.8286 2.7751 2.7232 2.6730 2.6243 |
4 3.9020 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 |
5 4.8534 4.7135 4.5797 4.4518 4.3295 4.2124 4.1002 |
6 5.7955 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 |
7 6.7282 6.4720 6.2303 6.0021 5.7864 5.5824 5.3893 |
8 7.6517 7.3255 7.0197 6.7327 6.4632 6.2098 5.9713 |
9 8.5660 8.1622 7.7861 7.4353 7.1078 6.8017 6.5152 |
10 9.4713 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 |
11 10.3676 9.7868 9.2526 8.7605 8.3064 7.8869 7.4987 |
12 11.2551 10.5753 9.9540 9.3851 8.8633 8.3838 7.9427 |
13 12.1337 11.3484 10.6350 9.9856 9.3936 8.8527 8.3577 |
14 13.0037 12.1062 11.2961 10.5631 9.8986 9.2950 8.7455 |
15 13.8651 12.8493 11.9379 11.1184 10.3797 9.7122 9.1079 |
16 14.7179 13.5777 12.5611 11.6523 10.8378 10.1059 9.4466 |
17 15.5623 14.2919 13.1661 12.1657 11.2741 10.4773 9.7632 |
18 16.3983 14.9920 13.7535 12.6593 11.6896 10.8276 10.0591 |
19 17.2260 15.6785 14.3238 13.1339 12.0853 11.1581 10.3356 |
20 18.0456 16.3514 14.8775 13.5903 12.4622 11.4699 10.5940 |
21 18.8570 17.0112 15.4150 14.0292 12.8212 11.7641 10.8355 |
22 19.6604 17.6580 15.9369 14.4511 13.1630 12.0416 11.0612 |
23 20.4558 18.2922 16.4436 14.8568 13.4886 12.3034 11.2722 |
24 21.2434 18.9139 16.9355 15.2470 13.7986 12.5504 11.4693 |
- A bond has a $1,000 face value, a current market price of $780, and pays semi-annual interest payments of $60 every year. What is the coupon rate? Required: Compute the Annual Coupon Interest Rate for the Bond. Show procedure. (3points)
2. Zamba Corp. issued 24 years ago a Bond with a par value of $1,000, an originalmaturity of 30 years and a Coupon Interest Rate of 12%. Now, Market Interest Rates are 6%.
a)- What would be the Value of this bond today if interest rates are compounded semiannually? (4 points)
b)- Compute the premium or discount for the bond (1 point)
3-A 8% annual coupon bond pays an annual interest and has a $1,000 par value. This bond is currently trading for
a)- $1,250 (its value today). This bond has a current yield of _______ percent. (4 points)
4- A 10-year zero couponbond has a par valueof $1,000 and a requiredreturn of 6% annual rate and is compounded annually. What would be the Value of this Zero Bond approximately ? (4 points
5- A perpetual bond has a $1,000face value and provides a 6% couponcompounded annually. The appropriate discount rate is 9%. What is the value of the perpetual bond today? (4 points)
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