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9.1: Bond Valuation
Calculate the value of bond that matures in 8 years and 1,000 SAR par value. The coupon rate is 6% and the market’s required
DATA
Years
Face value
PMT
Rate
Problem 9.2: Yield to Maturity
A bond’s market price is 950 SAR. It has a 1000 par value, will be mature in 10 years, and the coupon rate 8 percent annually.
is the bond’s yield to maturity? What happens to the bond’s yield to maturity if the bond matures in 17 years? What is matur
years?
Problem 9.3: Bond Valuation w/Semiannual Coupon Payment
A bond matures in 15 years with 1,000 SAR par value. The coupon rate is 6% and the market’s required yield to maturity is 1
What would be the value of this bond if it pays the coupon payment semiannually?
Problem 9.4: Bond Valuation w/Zero Coupon Payment
A zero coupon bond matures in 15 years with 1,000 SAR par value. The market’s required yield to maturity is 10.5%. What w
be the value of this bond?
9:5: Bondholder’s Expected Rate of Return
A bond matures in 17 years with 1,000 SAR par value. The coupon rate is 11% and the market price is 1500 SAR. What woul
the expected rate of this bond?
9.1: Bond Valuation
ate the value of bond that matures in 8 years and 1,000 SAR par value. The coupon rate is 6% and the market’s required yield
8
1000
60
10%
Problem 9.2: Yield to Maturity
d’s market price is 950 SAR. It has a 1000 par value, will be mature in 10 years, and the coupon rate 8 percent annually. What
bond’s yield to maturity? What happens to the bond’s yield to maturity if the bond matures in 17 years? What is mature in 6
years?
Problem 9.3: Bond Valuation w/Semiannual Coupon Payment
ond matures in 15 years with 1,000 SAR par value. The coupon rate is 6% and the market’s required yield to maturity is 14%.
What would be the value of this bond if it pays the coupon payment semiannually?
Problem 9.4: Bond Valuation w/Zero Coupon Payment
o coupon bond matures in 15 years with 1,000 SAR par value. The market’s required yield to maturity is 10.5%. What would
be the value of this bond?
9:5: Bondholder’s Expected Rate of Return
ond matures in 17 years with 1,000 SAR par value. The coupon rate is 11% and the market price is 1500 SAR. What would be
the expected rate of this bond?
9.1: Bond Valuation
Calculate the value of bond that matures in 8 years and 1,000 SAR par value. The coupon rate is 6% and the market’s
required yield to maturity is 10%.
DATA
Years
Face value
PMT
Rate
Answer 9.1
Face Value of Bond
No of Years
Yield to Maturity
Coupon Rate
Annual Coupon Payment (Face Value * Coupon Rate)
Maturity Value of Bond (assumed to be Face Value)
Value of the Bond
Problem 9.2: Yield to Maturity
A bond’s market price is 950 SAR. It has a 1000 par value, will be mature in 10 years, and the coupon rate 8 percent
annually. What is the bond’s yield to maturity? What happens to the bond’s yield to maturity if the bond matures in
17 years? What is mature in 6 years?
Answer 9.2
a.
b.
c.
a. 10 Years
b. 17 Years
c. 6 Years
Problem 9.3: Bond Valuation w/Semiannual Coupon Payment
A bond matures in 15 years with 1,000 SAR par value. The coupon rate is 6% and the market’s required yield to
maturity is 14%. What would be the value of this bond if it pays the coupon payment semiannually?
Answer 9.3
Where,
rate
nper = Number of Period
pmt = Coupon Payment
pv = The Value of This Bond
fv = Face Value
Where,
rate
nper = Number of Period
pmt = Coupon Payment
pv = The Value of This Bond
fv = Face Value
The Value of This Bond
Annully
Semiannully
Problem 9.4: Bond Valuation w/Zero Coupon Payment
A zero coupon bond matures in 15 years with 1,000 SAR par value. The market’s required yield to maturity is
10.5%. What would be the value of this bond?
Answer 9.4
rate
nper = Number of Period
pmt = Coupon Payment
pv = Value of This Bond
fv = Face Value
The Value of This Bond
9:5: Bondholder’s Expected Rate of Return
A bond matures in 17 years with 1,000 SAR par value. The coupon rate is 11% and the market price is 1500 SAR.
What would be the expected rate of this bond?
Answer 9.5
rate
nper = Number of Period
pmt = Coupon Payment
pv = Value of This Bond
fv = Face Value
The Expected Rate of This Bond
: Bond Valuation
and 1,000 SAR par value. The coupon rate is 6% and the market’s
yield to maturity is 10%.
8
1000
60
10%
1000
nper
rate
8
10%
6%
SAR 60
SAR 1,000
pmt
fv
SAR 786.60295
m 9.2: Yield to Maturity
ar value, will be mature in 10 years, and the coupon rate 8 percent
hat happens to the bond’s yield to maturity if the bond matures in
What is mature in 6 years?
Yield To Maturity
Where,
nper = Number of Period
pmt = Coupon Payment
pv = Bond’s Market Price
fv = Face Value
Yield To Maturity
Where,
nper = Number of Period
pmt = Coupon Payment
pv = Bond’s Market Price
RATE(nper,pmt,pv,fv)
8.77127%
10
SAR 80
-SAR 950
SAR 1,000
RATE(nper,pmt,pv,fv)
8.56913%
17
SAR 80
-SAR 950
fv = Face Value
SAR 1,000
YTM is decreased
Yield To Maturity
RATE(nper,pmt,pv,fv)
9.11854%
Where,
nper = Number of Period
pmt = Coupon Payment
pv = Bond’s Market Price
fv = Face Value
6
SAR 80
-SAR 950
SAR 1,000
YTM is increased
8.77127%
8.56913%
9.11854%
Decreased
Increased
uation w/Semiannual Coupon Payment
value. The coupon rate is 6% and the market’s required yield to
of this bond if it pays the coupon payment semiannually?
Annully
14%
15
SAR 60
SAR 508.62656
SAR 1,000
Semiannully
7%
30
SAR 30
SAR 503.63835
SAR 1,000
SAR 508.62656
SAR 503.63835
Valuation w/Zero Coupon Payment
1000*6% or ( 1000*Coupon Rate )
14%/2
15*2
1000*(6/2)% or ( 1000*Coupon Rate/2 )
1,000 SAR par value. The market’s required yield to maturity is
ould be the value of this bond?
10.5%
15
SAR 0
SAR 223.64842
SAR 1,000
1000*0% or ( 1000*Coupon Rate )
SAR 223.64842
er’s Expected Rate of Return
value. The coupon rate is 11% and the market price is 1500 SAR.
the expected rate of this bond?
6.16943%
17
SAR 110
-SAR 1,500
SAR 1,000
6.16943%
1000*11% or ( 1000*Coupon Rate )
1000*8% or ( 1000*Coupon Rate )
1000*8% or ( 1000*Coupon Rate )
1000*8% or ( 1000*Coupon Rate )
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