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Math Help - Bond Valuation

  1. #1
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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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  2. #2
    MHF Contributor
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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.
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