# II... A & B 1,2,3... Finance 250-QCC Professor Ken Friedman Principals of Fina

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II... A & B 1,2,3...

Finance 250-QCC Professor Ken Friedman Principals of Finance Bond Valuation Analvsis 1) For the following bond valuation scenarios determine: the market value of the bond, Pu, July, 2018 along with the present discounted value of its two components: the coupon interest payments and the principal value repaid at maturity c n Coupon Interest Rate Years Until Maturity kYield to Maturity (1) c-4%; k=5%; n-10 years (2) c-7% ; k=3%; n-20 years (3) c=2%; k=6%; n-5years (4) c= 5%; k=8%; n-30 years (5) c-6%; k-2%, n-10 years (6) c= 1%; k=3%; n-15 years II) (a) For the above scenarios, utilize the Excel spreadsheet function, PRICE, to determine the bond market price (b) For the following scenarios, determine the Yield to Maturity by utilizing the Excel financial function, YIELD: (1) c-4% ; PB = $110.50 ; n-10years (2) c-290 ; PB-$92.25 ; n 20 years (3) c-790 ; PB-$130.75 ; n-6 years

Explanation / Answer

I 1 2 3 4 5 6 Settlement Date 1-Aug-18 1-Aug-18 1-Aug-18 1-Aug-18 1-Aug-18 1-Aug-18 Maturity Date 30-Jun-28 30-Jun-38 30-Jun-23 30-Jun-48 30-Jun-28 30-Jun-33 Rate of interest 4% 7% 2% 5% 6% 1% Yeild 5% 3% 6% 8% 2% 3% Redemption Value 100.00 100.00 100.00 100.00 100.00 100.00 Price= Price(C1,C2,C3,C4,C5,1,1)           92.32       159.31         83.40         66.24      135.64         76.23 II 1 2 3 Settlement Date 1-Aug-18 1-Aug-18 1-Aug-18 Maturity Date 30-Jun-28 30-Jun-38 30-Jun-24 Rate of interest 4% 2% 7% Price 110.50 92.25 130.75 Redemption Value 100.00 100.00 100.00 Yield= Yield(settlement, maturity, rate, pr, redemption, frequency, [basis] ) 2.77% 2.50% 1.52%

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