QUESTION 1

BW007 is a 10 year Government bond listed on the BSE in November 2010. The bond coupon is 6% and a face value of P1,000. It has pays a yearly coupon rate every December of (P1,000*.06) 60 per annum in the past 9 years and due to mature(pay face value) in December 2020

(1.0253)²

The cash flows are as tabulated below.

Nov-11	Nov-12	Nov-13	Nov-14	Nov-15	Nov-16	Nov-17	Nov-18	Nov-19	Nov-20
P60	P60	P60	P60	P60	P60	P60	P60	P60	P60

Calculate the present value of the bond at December 2020 when the annual interest rate is 6.5%. (10 marks)

b) Describe a bond. (5 marks)

c) Explain the method for valuing bonds and stocks (5 marks)