please answer question 10

Q10 One of the other RIL bond of 10 year maturity (F.V. = Rs.100, coupon rate =10%) is also trading in the market at a yield of 9% while the 30 -year RIL is trading at a yield of 10%, what is the percentage change in price for each of these bonds for 1% decrease in the yields across all maturities? Q11. What is the percentage change in price for each of these bonds for 1% increase in the yields across all maturities? Q12. What would you infer from the above regards the senstivity of different maturity bonds for a given change in yield? Q13. In the above example for the RIL 30 year bond when interest rate fall by 1% what is the % change? What is the % change when the interest rates rise by 1% ? What is your inference. Q14. (Assuming) RIL issued a 40 year bond, 10 years before the issue of this 30 year bond at a coupon of 11%(F.V.=$100). The yield in the market for 30 year RIL bond is 8%. If the yield for 30 year maturity drops by 1%, then what is the % change in price for these different 30 year bonds? Q15. What is % change for yield for 30 year maturity rises by 1% ? Q16. What inference can you draw about the price change in bond price for similar maturity bonds with different coupon rate? Source: Reliance Industries Annual Report 1996-97 Q1. Ascertain the cash outflows for the bond till their maturity. Q2 If the YTM in the market for a 30 year bond is 10%, compute the price of the above bond? What is your inference? Q3. If after the issue the interest rates dropped by 1% then what would be the price of the bonds? The bond would trade at to the face value. Q4. If after the issue the interest rates rise by 1% then what would be the price of the bonds? The bond would trade at to the face value. Q5. What principle of bonds pricing do you infer from the results of Q3 and Q4 ? 5 Reliance Industries Limited Annual Report 1998-99 Q6. Just after the issue the interest rates dropped by 1%. What is the current yield of the bond? What is the YTM? What if after the issue the interest rates for the bond rises by 1% ? What do you infer? Q7. Compute the Present value of bond at different point in time (n=5,10,15,20,25,30) till the maturity of the bond when interest rate dropped by 1% after the issue? Q8. Compute the Present value of bond at different point in time (n=5,10,15,20,25,30) till the maturity of the bond when interest rate rise by 1% after the issue? Q9 From the results of Q7 and Q8 we infer that the on the bond as the bond approaches maturity