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Bond Valuation
This is Business finance related question I need assistance in this question.
Q. ABC Company has outstanding Rs.1,000 face–value bond with a 15 percent coupon
rate and 6 years remaining until final maturity. Interest payments are made annually.
Required:
What would be the value of this bond if your nominal annual required rate of return
is as follows?
i) 12 percent
ii) 15 percent
iii) 18 percent?
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Coupons are som commonly semi-annual that it is a safe assumption in the absence of useful information.
A 15% coupon, paid semi-annually, then: 1000*(0.15/2) = 75
"6 years remaining" is a little tricky. Let's assume a coupon payment was just made. There are then 12 coupons and the final asset sale to calculate the present value at each interest rate.
Let's see what you get.