Illustration 1

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A debenture of  100 face value carries an interest rate of 15 per cent is redeemable after 7 years at a premium of 5 per cent. If the required rate return is 16 per cent, what is the present value of the debentures? The current market price of the bond is  150. Advise the investor.

 

Illustration 2

What is the value of a bond of  10,000 with a 7% coupon rate, 5 years before maturity. The required rate of return is 8%. What is the present value of the debentures? The current market price of the bond is  11000.

 

Illustration 3

A Bond of  1,000 Face value with a coupon of 7 per cent is redeemable after 5 years at a premium of 5 per cent. The required rate of return is 8%. The current market price of the bond is  940. Whether investment at current market price of the bond advisable? The present value of  1 at 8% discounting rate are 0.926, 0.857, 0.794, 0.735 and 0.681.

 

Illustration 4:

A bond of  1000 face value carrying interest rate of 14% is redeemable after 6 years at a premium of 5%. If the required rate of return is 15%, what is the present value of the bond?

 

Illustration 5

A GOI bond of  1000 each has a coupon rate of 8 per cent annum and maturity period is 20 years. If the current market prices is  1050, find YTM?

 

Illustration 6

You are considering an investment in one of the following bonds:

 

Coupon Rate

Maturity

Price/ 100 Par Value

Bond A

12%

10 Year

70

Bond B

10 %

06 Year

60

(i)            What is YTM of each bond?

(ii)            Which bond would you recommend for investment?

 

Illustration 7

A bond of  1000 has a coupon rate of 6 % p.a. and maturity period is 3 years. The bond is currently selling at  900. What is yield to maturity in investment of this bond?

Illustration 8

A bond pays a interest annually and sells for  835. If six years left to maturity and a par value of  1000, what is the coupon rate if YTM is 12%?

 

Illustration 9

Calculate the present value of Debenture of Mahesh Ltd.

Year Coupon rate

1-2

8%

3-4

10%

5-7

12%

The face value of the debenture is 100. Debentures are redeemed at 5% premium. The required rate of return 16%.

 

Illustration 10

A  100 par value bond bears a coupon rate of 14 per cent and matures after five years. Interest is payable semi-annually. Compute the value of the bond if the required rate of return is 16 per cent

Illustration 11

Consider the following data for government securities:

Face Value         Interest Rate (%)         Maturity (Years)         Current Price

100,000                        0                                  1                           91,000

100,000                      10.5                               2                           99,000

100,000                      11.0                               3                           99,500

100,000                      11.5                               4                           99,900

Calculate the forward rates.

Illustration 12

A bond of  1000 face value carrying a interest of 14% is redeemable after 6 years at a premium of 5 %. If required return is 15 %.What is the present value of bond?

Illustration 13

A  100 par value bond, bearing a coupon rate of 11 percent will mature after five years. What is the value of the bond, if the discount rate is 15 percent?

Illustration 14

A  100 par value bond, bearing a coupon rate of 12 percent will mature after seven years. What is the value of the bond, if the discount rate is 14 percent? 12 percent?

Illustration 15

The market value of  1,000 par value bond, carrying a coupon rate of 12 percent and maturing after seven years, is  750. What is the yield to maturity on this bond?

Illustration 16

The market value of a  100 par value bond, carrying a coupon rate of 14 percent and maturing after 10 years, is  80. What is the yield to maturity on this bond?

 

For Solution/ Answer Please refer IAPM Textbook By Author Pawan Jhabak, Himalaya Publication.

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