1st Example:

Valuate an European 10 years, 5% coupon rate, 100,000 Euros face value German Bond, that is negotiated

5000 5000 5000 5000 5000 5000

0 1 2 3 4 5 6
108110.90 4807.69 4622.78 4444.98 4274.02 4109.64 3951.57
PREMIUM

Pvb= sumatoria Ct / (1+kb)*t + FVn / (1+kb)*n

FV $ 100,000.00
CR 5% coupon $ 5,000.00 Its five per cent of future value
Matur 10 years
KB 4%
PV=? Current Market Price

2nd Example:
Valuate an European 5 years, 4% coupon rate, 100000 euros face value French Bond, that is negotiated wit

3er Example:
Valuate a Ecuadorian Global 8 years, 9% coupon rate, 100.000 dollars face value Bond, discouting it at 9% c

More examples:

1) In Bloomberg you find that a German Bond 10 years Bond, 3% coupon rate 100000 Euros, is negotiated at 98.% of its p
2) Today Global Bonds of Brazil arte negotiated in the New York Stock Exchange in the following conditions:

Face Value Maturity Coupon Yield

1000000 5 6% 5%
100000 8 8% 9%
10000000 10 10% 12%

What are the current market prices, which Bond would yo buy, why??
ue German Bond, that is negotiated with a required rate of return of 4%

100000
5000 5000 5000 105000 5000
7 8 9 10
3799.59 3653.45 3512.93 70934.24 5000.00

t of future value

French Bond, that is negotiated with a require rate of return of 5%.

ace value Bond, discouting it at 9% coupon rate. What type of Bond is it, why?

Euros, is negotiated at 98.% of its price. What is the yield to maturity of the Bond?
e following conditions:
1st exercise
Valuate a 10 years bond 100,000 euros that has 1,5% coupon rate semiannually and is negotiated at 7% discounted rate
after 3 years the ice recalls the bond offering a 102,5% price, would you accept it?

100000.00 euros
10 years 20 periods
1.50% semiannual 1500.00 coupon
7.00% YTC

manual 1500.00 1500.00 1500.00 1500.00 1500.00 1500.00

traditional 1 2 3 4 5 6
71575.19 1449.28 1400.27 1352.91 1307.16 1262.96 1220.25

Bo= addition (coupons

VA= -71,575.19 € formula yield is 7%

after 3 years call date 3

100000.00 euros call price 102500.00
10 years 14 periods coupon 1500.00
1.50% semiannual 1500.00 coupon YTC 7.99%
7.00%

VA= -78,158.96 € 102500.00 offered value

2nd exercise
analyse a OMC 15 years bond 100 000 dollars, that has a 2,5% quarterly coupon rate, and is negotiated at 96,5% current
2 years later an international broker offers 101,5% of its price would you

100000.00 dollars
15 years 60 periods
2.50% quarterly 2500.00 coupon
96.50% P ( price) 2.62% yield to maturity

VA= $ 96,500.00

call date 2 years 8 periods

call price 101500.00
coupon 2500.00
YTC 3.17% yield to call

In the new york stock exchange today you can negotiate the following securities

homework 6,1 6,2 6,3 6,4 6,5

otiated at 7% discounted rate

1500.00 1500.00 1500.00 1500.00 1500.00 1500.00 1500.00 1500.00 1500.00

7 8 9 10 11 12 13 14 15
1178.99 1139.12 1100.60 1063.38 1027.42 992.67 959.11 926.67 895.34

years 6 periods

yield to call

s negotiated at 96,5% current market price,.

 100000.00
1500.00 1500.00 1500.00 1500.00 1500.00
16 17 18 19 20
865.06 835.81 807.54 780.23 51010.44
 Karla Trávez
8 "A" International Commerce
1,- Valuate a ECB10 years Bond. 100,000 euros, that has a 1.5% coupon rate semianually and is negotiated
at 7% discounted rate. After 3 years the ECB recalls the bond offering a 102,5% price, wouldyou accept it? Why?

FV = 100000
M= 10 years 20 periods
CR = 2% Semianually 1500
KB = 7% 3.5% $ 102,500
PV = ?
Call Price 100000
1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Bo = Addition [ Coupons t / ( 1 + Kb ) ^ t ]

Manually 1449.28 1400.27 1352.91 1307.16 1262.96 1220.25 1178.99 1139.12 1100.60 1063.38 1027.42 992.67 959.11 926.67 895.34 865.06 835.81 807.54 780.23 51010.44

Excell $ -71,575.19

B)
Call Date = 3 years 6 periods
Call Price = 102.5% $ 102,500
Coupon = 1500
YTC = $ -71,575.19 = [ Coupon 1 / ( 1+KB ) ^ 1 ] + [ Coupon 2 / ( 1+KB ) ^ 1 ] +,,,,,,, [ 102,500 / (1+KB) ^6]

7.99% Accepted because the Yield to Call is greater than the yield to maturity

2,- Analyze a GMC 15 years bond, 100,000 dollars that has 2,5% quarterly coupon rate and it is negotiated at
96,5% coupon market price. Two years later an International Broker offer 101,5% of its price, would you accept it

QUARTERLY IN 2 YEARS
FV = 100,000.00 FV = 100,000 PV = 96,500
M= 15 years Periods = 60 periods Call date = 2 years Periods = 8 periods
CR = 2.50% CR = 2,500 CR = 2,500
PV = 96.50% PV = 96,500 Call price = 101.5% FV = 101,500
Tasa = ? 2.62% YTM Quarterly Tasa = ? 3.17% YTC Quarterly
10.47% YTM 12.68% YTC
 Karla Trávez
8 "A" International Commerce

3,- In the New York Stock Exchange today you can negotiate the following fix - rent securities :

Bond Face Value Maturity Coupon Rate Price YTM YTC

a) Telefonica 100,000.00 5 1.50% quarter 101.5% 5.65% 6.14%
b) Bank of America 100,000.00 10 2.50% semi 99% 5.13% 6.49%
c) Toyota 100,000.00 12 1% semi 100% 2.00% 2.98%

Calculate the yield to maturity according to the information at the current market price. Assume that 2 years later
you can negotiate the bonds at 102% of their values, which bond would you negotiate, why?

a) TODAY IN 2 YEARS
FV = 100,000 PV = 101,500
M = 5 years 20 periods Call date = 2 years Periods = 8 periods
CR = 1.50% quarterly 1500 CR = 1,500
PV = 101.50% 101500 Call price = 102.0% FV = 102,000
Tasa = ? 1.41% YTM Quarterly Tasa = ? 1.54% YTC Quarterly
5.65% YTM 6.14% YTC

b) TODAY IN 2 YEARS
FV = 100,000 PV = 99,000
M = 10 years 20 periods Call date = 2 years Periods = 4 periods
CR = 2.50% semi 2500 CR = 2,500
PV = 99.00% 99000 Call price = 102.0% FV = 102,000
Tasa = ? 2.56% YTM Semianually Tasa = ? 3.25% YTC Semianually
5.13% YTM 6.49% YTC

b) TODAY IN 2 YEARS
FV = 100,000 PV = 100,000
M = 12 years 24 periods Call date = 2 years Periods = 4 periods
CR = 1.00% semi 1000 CR = 1,000
PV = 100.00% 100000 Call price = 102.0% FV = 102,000
Tasa = ? 1.00% YTM Semianually Tasa = ? 1.49% YTC Semianually
2.00% YTM 2.98% YTC
 Karla Trávez
8 "A" International Commerce
BOOK'S EXERCISES

6.1.- Compton Computer bonds pay $80 annual interest , mature in 10 years, and pay $1,000 at maturity. What will their
value be if the market rate of interest is 1) 6 percent, or 2) 10 percent, and interests is paid a) annually, b) semiannually?

CR = 80
M= 10 years
FV = 1000
KB = 6% annually
PV = ? 1000
80 80 80 80 80 80 80 80 80 80
0 1 2 3 4 5 6 7 8 9 10
75.47 71.20 67.17 63.37 59.78 56.40 53.20 50.19 47.35 603.07

PV = -$1,147.20 [ Coupon 1 / ( 1+KB ) ^ 1 ] + [ Coupon 2 / ( 1+KB ) ^ 1 ] +,,,,,,, [ 1080 / (1+KB) ^10]

CR = 80
M= 10 years 20 periods
FV = 1000
KB = 6% semiannually
PV = ? 1000
80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
75.47 71.20 67.17 63.37 59.78 56.40 53.20 50.19 47.35 44.67 42.14 39.76 37.51 35.38 33.38 31.49 29.71 28.03 26.44 336.75

PV = -$1,229.40 [ Coupon 1 / ( 1+KB ) ^ 1 ] + [ Coupon 2 / ( 1+KB ) ^ 1 ] +,,,,,,, [ 1080 / (1+KB) ^20]

CR = 80
M= 10 years
FV = 1000
KB = 10% annually
PV = ? 1000
80 80 80 80 80 80 80 80 80 80
0 1 2 3 4 5 6 7 8 9 10
72.73 66.12 60.11 54.64 49.67 45.16 41.05 37.32 33.93 416.39

PV = -$877.11 [ Coupon 1 / ( 1+KB ) ^ 1 ] + [ Coupon 2 / ( 1+KB ) ^ 1 ] +,,,,,,, [ 1080 / (1+KB) ^10]

 Karla Trávez
8 "A" International Commerce
CR = 80
M= 10 years 20 periods
FV = 1000
KB = 10% semiannually
PV = ? 1000
80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
72.73 66.12 60.11 54.64 49.67 45.16 41.05 37.32 33.93 30.84 28.04 25.49 23.17 21.07 19.15 17.41 15.83 14.39 13.08 160.54

PV = -$829.73 [ Coupon 1 / ( 1+KB ) ^ 1 ] + [ Coupon 2 / ( 1+KB ) ^ 1 ] +,,,,,,, [ 1080 / (1+KB) ^20]

6.3.- Greenman Engineering has some 15-years $1,000 par bonds outstanding, when have coupon interest rate of 9 percent
and pay interest annually. What is the yield to maturity on the bonds if thier current market price is:
a. $1,181.72
b. $795.99
c. Would you be wiling to pay $795.99 if you minimum required rate of return was 11 percent? Why or why not?

A) B)
PV = 1181.72 PV = 795.99
CR = 9% 90.00 CR = 9% 90.00
M= 15 years M= 15 years
FV = 1000 FV = 1000
YTM = ? YTM = ?

YTM = 7.00% YTM = 11.99%

6.4.- A $1,000 par value bond has a 12 percent coupon rate, pays interests annually, and has 15 years ramaining until it matures.
a. If Bo = $1,151.72, what is its yield to maturity (YTM)?
b. If the bond can be called in 6 years at $1,030, what is the bond's yield to call (YTC)?

A)
FV = 1000 Call Price = 1030
CR = 12% 120 CR = 120
M= 15 years Call time= 6 years
PV = 1151.72 PV = ###
YTM = ? YTM = ?

YTM = 10.00% YTM = 9.01%

 Karla Trávez
8 "A" International Commerce

6.6.- Kamath Brithers has a $1,000 par, 9 percent coupon rate bond oustanding. The has 14 years to maturity.
a. If the current market value of the bond is $1,200, and interest is paid annually, what is the bond's yield to maturity?
b. What if everthing is as in (a), but interest is paid semiannually?

a) ANNUALLY b) SEMIANNUALLY
FV = 1000 FV = 1000
CR = 9% 90 CR = 9% 90
M= 14 years M= 14 years 28 periods
PV = 1200 PV = 1200
YTM = ? YTM = ?

YTM = 6.75% YTM = 7.30%

 Karla Trávez
8 "A" International Commerce
 Karla Trávez
8 "A" International Commerce
 Karla Trávez
8 "A" International Commerce
 Karla Trávez
8 "A" International Commerce
 Karla Trávez
8 "A" International Commerce
 BRUNO RAMOS BARCO 8B

BANKING MANAGEMENT
TASK N° 1

PROBLEMS:

1) Valuate a British 10 years, 100000 Z with a 2% semiannually coupon rate that is negotiated at 6% discounted rate.
Assume 2 years later The British Central Bank recalls the bond at its Face Value. What is the YTC? Would you accept
the offering?

1ST PART

DATA
N= 10 years 100000 FV
FV = 100000 Z 2000 2000 2000 2000 2000 Coupon
CR = 2% semiannually t=0 1 2 3 … 20 Periods
K= 6% annually
N= 20 periods
Coupon = CR * FV CR= 2% semiannually
Coupon = 2000 K= 3% semiannually
Bond = (85,122.53) (Discounted Bond)

2ND PART

DATA
N= 2 years 100000 FV
CR = 2% semiannually 2000 2000 2000 2000 Coupon
PV = Bo = 85122.53 Z t=0 1 2 3 4 Periods
FV = 100000 Z
N= 4 periods
Coupon = CR * FV CR= 2% semiannually
Coupon = 2000 YTC = ?
YTC = 6.33% semiannually
YTC = 12.65% annually
 R//. Yes, because YTC represents a better percentage (6,33% semiannually) than K (3% semiannually)

2) The Bobl German 5 years bond is negotiated today at 98,5% of its value. If the bond is 100000 euros and 1% quarterly
coupon rate, How much is the YTM? After 3 years The European Central Bank recalls bonds at 102.5%. Would you accept it?
Why?

1ST PART

DATA
N= 5 years 100000 FV
CR = 1% quarterly 1000 1000 1000 1000 1000 Coupon
PV = 98500 98.5% t=0 1 2 3 … 20 Quarters
FV = 100000
N= 20 quarters
Coupon = CR * FV CR= 1% quarterly
Coupon = 1000 YTM = ?
YTM = 1.08% quarterly
YTM = 2.17% semiannually
YTM = 4.34% annually

2ND PART

DATA
N= 3 years 102500 FV
CR = 1% quarterly 1000 1000 1000 1000 1000 Coupon
PV = 98500 98.5% t=0 1 2 3 … 12 Quarters
FV = 102500 102.5%
N= 12 quarters
Coupon = CR * FV CR= 1% quarterly
Coupon = 1000 YTC = ?
YTC = 1.33% quarterly
YTC = 2.66% semiannually
YTC = 5.32% annually

R//. Yes, because YTC represents a better percentage (1,33% quarterly) than YTM (1,08% quarterly)
3) The following fix-rent financial information is taken from Bloomberg:

Bond FV Maturity CR Price Assume

Brazil 10000000 10 years 3.50% semiannually 101.50% After 4 years 102.50%
Mexico 1000000 5 years 1.50% quarterly 97.50% After 3 years 99.50%
Canada 100000 12 years 5% annually 98% After 5 years 101%
USA 100000 10 years 2.50% semiannually 100% After 5 years 103%

YTM = ?
YTC = ?

BRAZILIAN BOND - 1ST PART

DATA
N= 10 years 10000000 FV
CR = 3.50% semiannually 350000 350000 350000 350000 350000 Coupon
PV = 10150000 101.5% t=0 1 2 3 … 20 Periods
FV = 10000000
N= 20 periods
Coupon = CR * FV CR= 3,5% semiannually
Coupon = 350000 YTM = ?
YTM = 3.40% semiannually
YTM = 6.79% annually

BRAZILIAN BOND - 2ND PART

DATA
N= 4 years 10250000 FV
CR = 3.50% semiannually 350000 350000 350000 350000 350000 Coupon
PV = 10150000 101.5% t=0 1 2 3 … 8 Periods
FV = 10250000 102.5%
N= 8 periods
Coupon = CR * FV CR= 3,5% semiannually
Coupon = 350000 YTC = ?
 YTC = 3.56% semiannually
YTC = 7.11% annually

MEXICAN BOND - 1ST PART

DATA
N= 5 years 1000000 FV
CR = 1.50% quarterly 15000 15000 15000 15000 15000 Coupon
PV = 975000 97.5% t=0 1 2 3 … 20 Quarters
FV = 1000000
N= 20 quarters
Coupon = CR * FV CR= 1,5% quarterly
Coupon = 15000 YTM = ?
YTM = 1.65% quarterly
YTM = 3.30% semiannually
YTM = 6.59% annually

MEXICAN BOND - 2ND PART

DATA
N= 3 years 995000 FV
CR = 1.50% quarterly 15000 15000 15000 15000 15000 Coupon
PV = 975000 97.5% t=0 1 2 3 … 12 Quarters
FV = 995000 99.5%
N= 12 quarters
Coupon = CR * FV CR= 1,5% quarterly
Coupon = 15000 YTC = ?
YTC = 1.69% quarterly
YTC = 3.39% semiannually
YTC = 6.78% annually
CANADIAN BOND - 1ST PART

DATA
N= 12 years 100000 FV
CR = 5.00% annually 5000 5000 5000 5000 5000 Coupon
PV = 98000 98% t=0 1 2 3 … 12 Years
FV = 100000
N= 12 years
Coupon = CR * FV CR= 5% annually
Coupon = 5000 YTM = ?
YTM = 5.23% annually

CANADIAN BOND - 2ND PART

DATA
N= 5 years 101000 FV
CR = 5.00% annually 5000 5000 5000 5000 5000 Coupon
PV = 98000 98% t=0 1 2 3 4 5 Years
FV = 101000 101%
N= 5 years
Coupon = CR * FV CR= 5% annually
Coupon = 5000 YTC = ?
YTC = 5.65% annually
AMERICAN BOND - 1ST PART

DATA
N= 10 years 100000 FV
CR = 2.50% semiannually 2500 2500 2500 2500 2500 Coupon
PV = 100000 100% t=0 1 2 3 … 20 Periods
FV = 100000
N= 20 periods
Coupon = CR * FV CR= 2,5% semiannually
Coupon = 2500 YTM = ?
YTM = 2.50% semiannually
YTM = 5.00% annually

AMERICAN BOND - 2ND PART

DATA
N= 5 years 103000 FV
CR = 2.50% semiannually 2500 2500 2500 2500 2500 Coupon
PV = 100000 100% t=0 1 2 3 … 10 Periods
FV = 103000 103%
N= 10 periods
Coupon = CR * FV CR= 2,5% semiannually
Coupon = 2500 YTC = ?
YTC = 2.76% semiannually
YTC = 5.53% annually
 BRUNO RAMOS BARCO 8B

BANKING MANAGEMENT
TASK N° 2

MORE PROBLEMS:

1) In the New York Stock Exchange you can buy a 5 years FEDBOND, 100000 Dollars, 2.5%
semiannually coupon rate at 98.5% current market price. If you could renegotiate them 2 years later
at its Face Value. Would you accept it? Why?

1ST PART

DATA
N= 5 years 100000 FV
CR = 2.50% semiannually 2500 2500 2500 2500 2500 Coupon
PV = 98500 98.5% t=0 1 2 3 … 10 Periods
FV = 100000
N= 10 periods
Coupon = CR * FV CR= 2,5% semiannually
Coupon = 2500 YTM = ?
YTM = 2.67% semiannually
YTM = 5.35% annually

2ND PART

DATA
N= 2 years 100000 FV
CR = 2.50% semiannually 2500 2500 2500 2500 Coupon
PV = 98500 98.5% t=0 1 2 3 4 Periods
FV = 100000 100%
N= 4 periods
Coupon = CR * FV CR= 2,5% semiannually
Coupon = 2500 YTC = ?
YTC = 2.90% semiannually
YTC = 5.81% annually
 R//. Yes, because YTC represents a better percentage (2,90% semiannually) than YTM (2,67% semiannually)

2) The Bond of America has the following portfolio:

Bond FV Maturity CR Price YTM YTC

GMC 1000000 10 years 4% semiannually 97.50% 8.37% 10.34%
ADIDAS 100000 5 years 1.5% quarterly 95.81% 7% 9.24%
Petrobras 10000000 3 years 0.5% monthly 102.78% 5% 5.48%
Mitsubishi 1000000 12 years 1.5% semiannually 101% 2.90% 3.45%

Analyze the current market prices given and the YTM and the YTC, consider a renegotiation of all
bonds 2 years later when FED and ECB have decided to decrease interest rate policies to 2.5% and the
new Bond Price reference is 102% of its value . Would you accept it to renegotiate it. Why???

GMC BOND - 1ST PART

DATA
N= 10 years 1000000 FV
CR = 4% semiannually 40000 40000 40000 40000 40000 Coupon
PV = 975000 97.50% t=0 1 2 3 … 20 Periods
FV = 1000000
N= 20 periods
Coupon = CR * FV CR= 4% semiannually
Coupon = 40000 YTM = ?
YTM = 4.19% semiannually
YTM = 8.37% annually

GMC BOND - 2ND PART

DATA
N= 2 years 1020000 FV
CR = 4% semiannually 40000 40000 40000 40000 Coupon
PV = 975000 97.50% t=0 1 2 3 4 Periods
FV = 1020000 102%
N= 4 periods
Coupon = CR * FV CR= 4% semiannually
Coupon = 40000 YTC = ?
YTC = 5.17% semiannually
YTC = 10.34% annually
R//. Yes, because YTC (10,34% annually) is more than YTM (8,37% annually)

ADIDAS BOND - 1ST PART

DATA
N= 5 years 100000 FV
CR = 1.50% quarterly 1500 1500 1500 1500 1500 Coupon
YTM = 7% annually t=0 1 2 3 … 20 Quarters
PV = ?
FV = 100000 N= 20 quarters
CR= 1,5% quarterly
Coupon = CR * FV YTM = 1,75% quarterly
Coupon = 1500
Price = (95,811.78) (Discounted Bond)

ADIDAS BOND - 2ND PART

DATA
N= 2 years 102000 FV
CR = 1.50% quarterly 1500 1500 1500 1500 1500 Coupon
PV = 95811.78 95.81% t=0 1 2 3 … 8 Quarters
FV = 102000 102%
N= 8 quarters
Coupon = CR * FV CR= 1,5% quarterly
Coupon = 1500 YTC = ?
YTC = 2.31% quarterly
YTC = 4.62% semiannually
YTC = 9.24% annually

R//. Yes, because YTC (9,24% annually) is more than YTM (7,00% annually)
PETROBRAS BOND - 1ST PART

DATA
N= 3 years 10000000 FV
CR = 0.50% monthly 50000 50000 50000 50000 50000 Coupon
YTM = 5% annually t=0 1 2 3 … 36 Months
PV = ?
FV = 10000000 N= 36 months
CR= 0,5% monthly
Coupon = CR * FV YTM = 0,42% monthly
Coupon = 50000
Price = (10,278,047.51) (Premium Bond)

PETROBRAS BOND - 2ND PART

DATA
N= 2 years 10200000 FV
CR = 0.50% monthly 50000 50000 50000 50000 50000 Coupon
PV = 10278047.51 102.78% t=0 1 2 3 … 24 Months
FV = 10200000 102%
N= 24 months
Coupon = CR * FV CR= 0,5% monthly
Coupon = 50000 YTC = ?
YTC = 0.46% monthly
YTC = 1.37% quarterly
YTC = 2.74% semiannually
YTC = 5.48% annually

R//. Yes, because YTC (5,48% annually) is more than YTM (5,00% annually)
MITSUBISHI BOND - 1ST PART

DATA
N= 12 years 1000000 FV
CR = 1.50% semiannually 15000 15000 15000 15000 15000 Coupon
PV = 1010000 101% t=0 1 2 3 … 24 Periods
FV = 1000000
N= 24 periods
Coupon = CR * FV CR= 1,5% semiannually
Coupon = 15000 YTM = ?
YTM = 1.45% semiannually
YTM = 2.90% annually

MITSUBISHI BOND - 2ND PART

DATA
N= 2 years 1020000 FV
CR = 1.50% semiannually 15000 15000 15000 15000 Coupon
PV = 1010000 101% t=0 1 2 3 4 Periods
FV = 1020000 102%
N= 4 periods
Coupon = CR * FV CR= 1,5% semiannually
Coupon = 15000 YTC = ?
YTC = 1.73% semiannually
YTC = 3.45% annually

R//. Yes, because YTC (3,45% annually) is more than YTM (2,90% annually)
3) Valuate the following Bonds according to the information:

Bond FV Maturity CR Price YTM YTC

Gol 100000 8 years 4% semiannually 94.38% 9% 10.22%
Telefonica 1000000 10 years 1% quarterly 100.50% 3.94% 3.82%
England 10000000 12 years 2% semiannually 99.50% 4.05% 4.18%
Mitsubishi 1000000 5 years 0.50% quarterly 102.40% 1.50% 1.18%

Analyze the current market prices given and the YTM and the YTC, consider a renegotiation of all
bonds 3 years later when FED and ECB have decided to decrease interest rate policies to 6% and the
new Bond Price reference is its face value . Would you accept it to renegotiate it. Why???

GOL BOND - 1ST PART

DATA
N= 8 years 100000 FV
CR = 4% semiannually 4000 4000 4000 4000 4000 Coupon
YTM = 9% annually t=0 1 2 3 … 16 Periods
PV = ?
FV = 100000 N= 16 periods
CR= 4% semiannually
Coupon = CR * FV YTM = 4,5% semiannually
Coupon = 4000
Price = (94,382.99) (Discounted Bond)

GOL BOND - 2ND PART

DATA
N= 3 years 100000 FV
CR = 4% semiannually 4000 4000 4000 4000 4000 Coupon
PV = 94382.99 94.38% t=0 1 2 3 … 6 Periods
FV = 100000 100%
N= 6 periods
Coupon = CR * FV CR= 4% semiannually
Coupon = 4000 YTC = ?
YTC = 5.11% semiannually
YTC = 10.22% annually

R//. Yes, because YTC (10,22% annually) is more than YTM (9,00% annually)

TELEFONICA BOND - 1ST PART

DATA
N= 10 years 1000000 FV
CR = 1% quarterly 10000 10000 10000 10000 10000 Coupon
PV = 1005000 100.50% t=0 1 2 3 … 40 Quarters
FV = 1000000
N= 40 quarters
Coupon = CR * FV CR= 1% quarterly
Coupon = 10000 YTM = ?
YTM = 0.98% quarterly
YTM = 1.97% semiannually
YTM = 3.94% annually

TELEFONICA BOND - 2ND PART

DATA
N= 3 years 1000000 FV
CR = 1% quarterly 10000 10000 10000 10000 10000 Coupon
PV = 1005000 100.50% t=0 1 2 3 … 12 Quarters
FV = 1000000 100%
N= 12 quarters
Coupon = CR * FV CR= 1% quarterly
Coupon = 10000 YTC = ?
YTC = 0.96% quarterly
YTC = 1.91% semiannually
YTC = 3.82% annually

R//. No, because YTC (3,82% annually) is less than YTM (3,94% annually)
ENGLAND BOND - 1ST PART

DATA
N= 12 years 10000000 FV
CR = 2% semiannually 200000 200000 200000 200000 200000 Coupon
PV = 9950000 99.50% t=0 1 2 3 … 24 Periods
FV = 10000000
N= 24 periods
Coupon = CR * FV CR= 2% semiannually
Coupon = 200000 YTM = ?
YTM = 2.03% semiannually
YTM = 4.05% annually

ENGLAND BOND - 2ND PART

DATA
N= 3 years 10000000 FV
CR = 2% semiannually 200000 200000 200000 200000 200000 Coupon
PV = 9950000 99.50% t=0 1 2 3 … 6 Periods
FV = 10000000 100%
N= 6 periods
Coupon = CR * FV CR= 2% semiannually
Coupon = 200000 YTC = ?
YTC = 2.09% semiannually
YTC = 4.18% annually

R//. Yes, because YTC (4,18% annually) is more than YTM (4,05% annually)
MITSUBISHI BOND - 1ST PART

DATA
N= 5 years 1000000 FV
CR = 0.50% quarterly 5000 5000 5000 5000 5000 Coupon
YTM = 1.50% annually t=0 1 2 3 … 20 Quarters
PV = ?
FV = 1000000 N= 20 quarters
CR= 0,5% quarterly
Coupon = CR * FV YTM = 0,375% quarterly
Coupon = 5000
Price = (1,024,042.12) (Premium Bond)

MITSUBISHI BOND - 2ND PART

DATA
N= 3 years 1000000 FV
CR = 0.50% quarterly 5000 5000 5000 5000 5000 Coupon
PV = 1024042.12 102.40% t=0 1 2 3 … 12 Quarters
FV = 1000000 100%
N= 12 quarters
Coupon = CR * FV CR= 0,5% quarterly
Coupon = 5000 YTC = ?
YTC = 0.30% quarterly
YTC = 0.59% semiannually
YTC = 1.18% annually

R//. No, because YTC (1,18% annually) is less than YTM (1,50% annually)
BRUNO RAMOS BARCO 8B

BANKING MANAGEMENT
TASK N° 3

6.3.- Cavalier industries has a current (Do) cash dividen of $2 per share. You estimate that cash dividends will grow at 12% per year for
each of 3 years (t1,t2,t3), and then a 6% oer year for each of 2 more years (t4 and t5). After t5 you expect them to grow at 2% per year to
infinity.

a.- What is the current market value of Cavalier Industries common stock if the required rate of return is 14%?
b.- What is the market price if evereything is the same as in a) except that after year 5 there is no expected growth in cash dividends

Data (Section A) P5
Do = 2 Po=? d1 d2 d3 d4 d5 d6
g1 = 12% t=0 1 2 3 4 5
g2 = 6%
g3 = 2%
Ks = 14% 12%
6%
2%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 d1 2.24

D1 = 2(1+0,12)^1 D2 = 2(1+0,12)^2 D3 = 2(1+0,12)^3 d2 2.51
D1 = 2,24 D2 = 2,51 D3 = 2,81 d3 2.81
d4 2.98
d5 3.16
D4 = D3(1+g2)^1 D5 = D3(1+g2)^2 D6 = D5(1+g3)^1 d6 3.22
D4 = 2,81(1+0,06)^1 D5 = 2,81(1+0,06)^2 D6 = 3,16(1+0,02)^1 P5 26.84
D4 = 2,98 D5 = 3,16 D6 = 3,22 Po 23.13

P5 = D6 / (Ks-g3)
P5 = 3,22 / (0,14-0,02)
P5 = 26,84

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

Po = 2,24/(1,14)^1 + 2,51/(1,14)^2 + 2,81/(1,14)^3 + 2,98/(1,14)^4 + 3,16/(1,14)^5 + 26,84/(1,14)^5
Po = 1,96 + 1,93 + 1,90 + 1,76 + 1,64 + 13,94
R//. Po = $23,13
 Data (Section B) P5
Do = 2 Po=? d1=2,24 d2=2,51 d3=2,81 d4=2,98 d5=3,16
g1 = 12% t=0 1 2 3 4 5 No-Growth
g2 = 6%
Ks = 14%
12%
P5 = D1 / Ks 6%
P5 = d5 / Ks
P5 = 3,16 / 0,14 P5 22.55
P5 = 22,55 Po 20.90

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

Po = 2,24/(1,14)^1 + 2,51/(1,14)^2 + 2,81/(1,14)^3 + 2,98/(1,14)^4 + 3,16/(1,14)^5 + 22,55/(1,14)^5
Po = 1,96 + 1,93 + 1,90 + 1,76 + 1,64 + 11,71
R//. Po = $20,9
6.7.- You are interested in buying 100 shares of a &60 par value preferred stock that has an 8,5% dividend rate
a.- If you required return is 11%, how much would you willing to pay to acquire its 100 shares?
b.- What if no dividend will be paid until t = 3? At the same required return, how much would you now be willing to pay?

Data (Section A)
Po = 60 D1 = Po * dr Po = D1 / Ks D1 5.10
dr = 8.50% D1 = 60 * 8,5% Po = 5,10 / 11% Po 4636.36
Ks = 11% D1 = 5,10 Po = 46,36 x 100 shares
D1 = ? Po = $4636,36

Data (Section B) P3 = 46,36

D4 = 5.10 Po=? d1 = 0 d2 = 0 d3 = 0 d4=5,10
Ks = 11% t=0 1 2 3 Infinity

P3 = D4 / Ks Po = P3 / (1+Ks)^3 P3 46.36
P3 = 5,10 / 11% Po = 46,36 / (1+0,11)^3 Po 3390.07
P3 = 46,36 Po = 33,90 x 100 shares
Po = 3390,07
6.9.- A stock currently pays cash dividends of $4 oer share (Do = $4), and the required rate of return is 12%. What is its market value in the
following cases?
a.- There is o future growth in dividends.
b.- Dividends grow at 8% per year to infinity.
c.- Dividends grow at 5% for each of 2 years; and there is no growth expected after D2.
d.- Growth will be 10% for each of 2 years (n = 2) after which growth will be 5% per year until infinity.
e.- Recalculate d) where growth is now 7% for 5 years ( n = 5 ), after which growth will be 3% per year until infinity.
f.- Finally, now suppose the required rate of return is 15% and Do = $2.50. Recalculate a), b), d) and e) with these new values.

Data (Section A)
Do = 4 Po = D1 / Ks Po 33.33
Ks = 12% Po = 4 / 0,12
Po = $33,33

Data (Section B)
Do = 4 Po = D1 / (Ks-g) Po 100
g1 = 8% Po = 4 / (0,12-0,08)
Ks = 12% Po = $100

Data (Section C) P2
Do = 4 Po=? d1 d2
g1 = 5% t=0 1 2 No-Growth
Ks = 12%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 P2 = D1 / Ks d1 4.20

D1 = 4(1+0,05)^1 D2 = 4(1+0,05)^2 P2 = d2 / Ks d2 4.41
D1 = 4,20 D2 = 4,41 P2 = 4,41 / 0,12 P2 36.75
P2 = 36,75 Po 36.57

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

Po = 4,20/(1,12)^1 + 4,41/(1,12)^2 + 36,75/(1,12)^2
Po = 3,75 + 3,52 + 29,30
R//. Po = $36,57
 Data (Section D) P2
Do = 4 Po=? d1 d2 d3
g1 = 10% t=0 1 2
g2 = 5%
Ks = 12%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = D2(1+g2)^1 d1 4.40

D1 = 4(1+0,10)^1 D2 = 4(1+0,10)^2 D3 = 4,84(1+0,05)^1 d2 4.84
D1 = 4,40 D2 = 4,84 D3 = 5,08 d3 5.08
P2 72.60
P2 = D3 / (Ks-g2) Po 65.67
P2 = 5,08 / (0,12-0,05)
P2 = $72,60

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

Po = 4,40/(1,12)^1 + 4,84/(1,12)^2 + 72,60/(1,12)^2
Po = 3,93 + 3,86 + 57,88
R//. Po = $65,67
 Data (Section E) P5
Do = 4 Po=? d1 d2 d3 d4 d5 d6
g1 = 7% t=0 1 2 3 4 5
g2 = 3%
Ks = 12%
7%
3%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 d1 4.28

D1 = 4(1+0,07)^1 D2 = 4(1+0,07)^2 D1 = 4(1+0,07)^3 d2 4.58
D1 = 4,28 D2 = 4,58 D3 = 4,90 d3 4.90
d4 5.24
d5 5.61
D4 = Do(1+g1)^4 D5 = Do(1+g1)^5 D6 = D5(1+g2)^1 d6 5.78
D4 = 4(1+0,07)^4 D5 = 4(1+0,07)^5 D6 = 5,61(1+0,03)^1 P5 64.21
D4 = 5,24 D5 = 5,61 D6 = 5,78 Po 53.90

P5 = D6 / (Ks-g2)
P5 = 5,78 / (0,12-0,03)
P5 = $64,21

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

Po = 4,28/(1,12)^1 + 4,58/(1,12)^2 + 4,90/(1,12)^3 + 5,24/(1,12)^4 + 5,61/(1,12)^5 + 64,21/(1,12)^5
Po = 3,82 + 3,65 + 3,49 + 3,33 + 3,18 + 36,43
R//. Po = $53,90

Data (Section F)
Do = 2.50 Po = D1 / Ks Po 16.67
Ks = 15% Po = 2,50 / 0,15
Po = $16,67
 Data (Section F)
Do = 2.50 Po = D1 / (Ks-g) Po 36
g1 = 8% Po = 2,50 / (0,15-0,08)
Ks = 15% Po = $36

Data (Section F) P2
Do = 2.50 Po=? d1 d2 d3
g1 = 10% t=0 1 2
g2 = 5%
Ks = 15%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = D2(1+g2)^1 d1 2.75

D1 = 2,50(1+0,10)^1 D2 = 2,50(1+0,10)^2 D3 = 3,03(1+0,05)^1 d2 3.03
D1 = 2,75 D2 = 3,03 D3 = 3,18 d3 3.18
P2 31.76
P2 = D3 / (Ks-g2) Po 28.70
P2 = 5,08 / (0,15-0,05)
P2 = $31,76

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

Po = 2,75/(1,15)^1 + 3,03/(1,15)^2 + 31,76/(1,15)^2
Po = 2,39 + 2,29 + 24,02
R//. Po = $28,70
 Data (Section F) P5
Do = 2.50 Po=? d1 d2 d3 d4 d5 d6
g1 = 7% t=0 1 2 3 4 5
g2 = 3%
Ks = 15%
7%
3%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 d1 2.68

D1 = 2,50(1+0,07)^1 D2 = 2,50(1+0,07)^2 D3 = 2,50(1+0,07)^3 d2 2.86
D1 = 2,68 D2 = 2,86 D3 = 3,06 d3 3.06
d4 3.28
d5 3.51
D4 = Do(1+g1)^4 D5 = Do(1+g1)^5 D6 = D5(1+g2)^1 d6 3.61
D4 = 2,50(1+0,07)^4 D5 = 2,50(1+0,07)^5 D6 = 3,51(1+0,03)^1 P5 30.10
D4 = 3,28 D5 = 3,51 D6 = 3,61 Po 25.10

P5 = D6 / (Ks-g2)
P5 = 3,61 / (0,15-0,03)
P5 = $30,10

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

Po = 2,68/(1,15)^1 + 2,86/(1,15)^2 + 3,06/(1,15)^3 + 3,28/(1,15)^4 + 3,51/(1,15)^5 + 30,10/(1,15)^5
Po = 2,33 + 2,16 + 2,01 + 1,88 + 1,75 + 14,97
R//. Po = $25,10
BRUNO RAMOS BARCO 8B
BANKING MANAGEMENT - TASK N°4

Years 1,2,3 Years 4,5 6 to infinity

Share MKT Price Current Dividend Growth 1 Growth 2 Growth 3 Ks
Google 250 40 20% 25% 10% infinity 30%
Microsoft 100 20 10% 8% 5% infinity 15%
Petrobras 50 15 25% 20% 10% infinity 20%
Exxon Mobil 1000 150 12% 8% 6% infinity 10%
Budweiser 10 2 10% 15% 20% infinity 15%

1.- According to the information valuate all the shares with the 3 different stages, include current market prices with infinity valuations and with no growth.
2.- Two years later J.P.Morgan Investment Bank of New York wants to buy the Portfolio with the following prices:

Share MKT Price

Google 450
Microsoft 200 Would you recommend to accept the offering, why?
Petrobras 150
Exxon Mobil 1450
Budweiser 18

Data (Google - Infinity) P5

Do = 40 Po=? d1 d2 d3 d4 d5 d6
g1 = 20% t=0 1 2 3 4 5
g2 = 25%
g3 = 10%
Ks = 30% 20%
25%
D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 Years Dividends PV 10%
D1 = 40(1+0,20)^1 D2 = 40(1+0,20)^2 D3 = 40(1+0,20)^3 d1 48.00 36.92
D1 = 48 D2 = 57.60 D3 = 69.12 d2 57.60 34.08
d3 69.12 31.46
D4 = D3(1+g2)^1 D5 = D3(1+g2)^2 D6 = D5(1+g3)^1 d4 86.40 30.25
D4 = 69.12(1+0,25)^1 D5 = 69.12(1+0,25)^2 D6 = 108(1+0,10)^1 d5 108.00 29.09
D4 = 86.40 D5 = 108 D6 = 118.80 d6 118.80
P5 594.00 159.98
P5 = D6/(Ks-g3)
P5 = 594 Po 321.79
 Data (Google - No Growth) P5
Do = 40 Po=? d1 d2 d3 d4 d5
g1 = 20% t=0 1 2 3 4 5 No-Growth
g2 = 25%
Ks = 30%
20%
25%
Years Dividends PV
D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 d1 48.00 36.92
D1 = 40(1+0,20)^1 D2 = 40(1+0,20)^2 D3 = 40(1+0,20)^3 d2 57.60 34.08
D1 = 48 D2 = 57.60 D3 = 69.12 d3 69.12 31.46
d4 86.40 30.25
d5 108.00 29.09
D4 = D3(1+g2)^1 D5 = D3(1+g2)^2 P5 = d5 / Ks P5 360.00 96.96
D4 = 69.12(1+0,25)^1 D5 = 69.12(1+0,25)^2 P5 = 108 / 0,30
D4 = 86.40 D5 = 108 P5 = 360 Po 258.76

New Data (Google - No Growth)

N= 2 P2
D1 = 48.00 Po=258,76 d1 d2
D2 = 57.60 t=0 1 2
P2 = 450
Po = 258.76

Valores -258.76 48.00 507.60

TIR 49.64% Yes, because TIR (49,64%) is more than K (30%)
 Data (Microsoft - Infinity) P5
Do = 20 Po=? d1 d2 d3 d4 d5 d6
g1 = 10% t=0 1 2 3 4 5
g2 = 8%
g3 = 5%
Ks = 15% 10%
8%
5%
D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3
D1 = 20(1+0,10)^1 D2 = 20(1+0,10)^2 D3 = 20(1+0,10)^3 Years Dividends PV
D1 = 22 D2 = 24,20 D3 = 26,62 d1 22.00 19.13
d2 24.20 18.30
d3 26.62 17.50
D4 = D3(1+g2)^1 D5 = D3(1+g2)^2 D6 = D5(1+g3)^1 d4 28.75 16.44
D4 = 26,62(1+0,08)^1 D5 = 26,62(1+0,08)^2 D6 = 31,05(1+0,05)^1 d5 31.05 15.44
D4 = 28,75 D5 = 31,05 D6 = 32,60 d6 32.60
P5 326.02 162.09
P5 = D6 / (Ks-g3)
P5 = 32,60 / (0,15-0,05)
P5 = 326,02 Total 248.90

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

R//. Po = $248,90

New Data (Microsoft - Infinity)

N= 2 P2
D1 = 22.00 Po=248,90 d1 d2
D2 = 24.20 t=0 1 2
P2 = 200
Po = 248.90

Valores -248.90 22.00 224.20

TIR -0.57% No, because TIR (-0,57%) is less than K (15%)
 Data (Microsoft - No Growth) P5
Do = 20 Po=? d1 d2 d3 d4 d5
g1 = 10% t=0 1 2 3 4 5 No-Growth
g2 = 8%
Ks = 15%
10%
8%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3

D1 = 20(1+0,10)^1 D2 = 20(1+0,10)^2 D3 = 20(1+0,10)^3 Years Dividends PV
D1 = 22 D2 = 24,20 D3 = 26,62 d1 22.00 19.13
d2 24.20 18.30
d3 26.62 17.50
D4 = D3(1+g2)^1 D5 = D3(1+g2)^2 P5 = d5 / Ks d4 28.75 16.44
D4 = 26,62(1+0,08)^1 D5 = 26,62(1+0,08)^2 P5 = 31,05 / 0,15 d5 31.05 15.44
D4 = 28,75 D5 = 31,05 P5 = 207 P5 207.00 102.91

Total 189.72

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

R//. Po = $189,72

New Data (Microsoft - No Growth)

N= 2 P2
D1 = 22.00 Po=189,72 d1 d2
D2 = 24.20 t=0 1 2
P2 = 200
Po = 189.72

Valores -189.72 22.00 224.20

TIR 14.66% No, because TIR (14,66%) is less than K (15%)
 Data (Petrobras - Infinity) P5
Do = 15 Po=? d1 d2 d3 d4 d5 d6
g1 = 25% t=0 1 2 3 4 5
g2 = 20%
g3 = 10%
Ks = 20% 25%
20%
10%
D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3
D1 = 15(1+0,25)^1 D2 = 15(1+0,25)^2 D3 = 15(1+0,25)^3 Years Dividends PV
D1 = 18,75 D2 = 23,44 D3 = 29,30 d1 18.75 15.63
d2 23.44 16.28
d3 29.30 16.95
D4 = D3(1+g2)^1 D5 = D3(1+g2)^2 D6 = D5(1+g3)^1 d4 35.16 16.95
D4 = 29,30(1+0,20)^1 D5 = 29,30(1+0,20)^2 D6 = 42,19(1+0,10)^1 d5 42.19 16.95
D4 = 35,16 D5 = 42,19 D6 = 46,41 d6 46.41
P5 464.06 186.50
P5 = D6 / (Ks-g3)
P5 = 46,41 / (0,20-0,10)
P5 = 464,06 Total 269.26

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

R//. Po = $269,26

New Data (Petrobras - Infinity)

N= 2 P2
D1 = 18.75 Po=269,26 d1 d2
D2 = 23.44 t=0 1 2
P2 = 150
Po = 269.26

Valores -269.26 18.75 173.44

TIR -16.19% No, because TIR (-16,19%) is less than K (20%)
 Data (Petrobras - No Growth) P5
Do = 15 Po=? d1 d2 d3 d4 d5
g1 = 25% t=0 1 2 3 4 5 No-Growth
g2 = 20%
Ks = 20%
25%
20%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3

D1 = 15(1+0,25)^1 D2 = 15(1+0,25)^2 D3 = 15(1+0,25)^3 Years Dividends PV
D1 = 18,75 D2 = 23,44 D3 = 29,30 d1 18.75 15.63
d2 23.44 16.28
d3 29.30 16.95
D4 = D3(1+g2)^1 D5 = D3(1+g2)^2 P5 = d5 / Ks d4 35.16 16.95
D4 = 29,30(1+0,20)^1 D5 = 29,30(1+0,20)^2 P5 = 42,19 / 0,20 d5 42.19 16.95
D4 = 35,16 D5 = 42,19 P5 = 210,94 P5 210.94 84.77

Total 167.53

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

R//. Po = $167,53

New Data (Petrobras - No Growth)

N= 2 P2
D1 = 18.75 Po=167,53 d1 d2
D2 = 23.44 t=0 1 2
P2 = 150
Po = 167.53

Valores -167.53 18.75 173.44

TIR 7.50% No, because TIR (7,50%) is less than K (20%)
 Data (Exxon - Infinity) P5
Do = 150 Po=? d1 d2 d3 d4 d5 d6
g1 = 12% t=0 1 2 3 4 5
g2 = 8%
g3 = 6%
Ks = 10% 12%
8%
6%
D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3
D1 = 150(1+0,12)^1 D2 = 150(1+0,12)^2 D3 = 150(1+0,12)^3 Years Dividends PV
D1 = 168 D2 = 188,16 D3 = 210,74 d1 168.00 152.73
d2 188.16 155.50
d3 210.74 158.33
D4 = D3(1+g2)^1 D5 = D3(1+g2)^2 D6 = D5(1+g3)^1 d4 227.60 155.45
D4 = 210,74(1+0,08)^1 D5 = 210,74(1+0,08)^2 D6 = 245,81(1+0,06)^1 d5 245.81 152.63
D4 = 227,60 D5 = 245,81 D6 = 260,55 d6 260.55
P5 6513.86 4044.60
P5 = D6 / (Ks-g3)
P5 = 260,55 / (0,10-0,06)
P5 = 6513,86 Total 4819.24

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

R//. Po = $4819,24

New Data (Exxon - Infinity)

N= 2 P2
D1 = 168.00 Po=4819,24 d1 d2
D2 = 188.16 t=0 1 2
P2 = 1450
Po = 4819.24

Valores -4819.24 168.00 1638.16

TIR -156.59% No, because TIR (-39,33%) is less than K (10%)
 Data (Exxon - No Growth) P5
Do = 150 Po=? d1 d2 d3 d4 d5
g1 = 12% t=0 1 2 3 4 5 No-Growth
g2 = 8%
Ks = 10%
12%
8%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3

D1 = 150(1+0,12)^1 D2 = 150(1+0,12)^2 D3 = 150(1+0,12)^3 Years Dividends PV
D1 = 168 D2 = 188,16 D3 = 210,74 d1 168.00 152.73
d2 188.16 155.50
d3 210.74 158.33
D4 = D3(1+g2)^1 D5 = D3(1+g2)^2 P5 = d5 / Ks d4 227.60 155.45
D4 = 210,74(1+0,08)^1 D5 = 210,74(1+0,08)^2 P5 = 245,81 / 0,10 d5 245.81 152.63
D4 = 227,60 D5 = 245,81 P5 = 2458,06 P5 2458.06 1526.26

Total 2300.91

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

R//. Po = $2300,91

New Data (Exxon - No Growth)

N= 2 P2
D1 = 168.00 Po=2300,91 d1 d2
D2 = 188.16 t=0 1 2
P2 = 1450
Po = 2300.91

Valores -2300.91 168.00 1638.16

TIR -11.89% No, because TIR (-11,89%) is less than K (10%)
 Data (Budweiser - Infinity) P5
Do = 2 Po=? d1 d2 d3 d4 d5 d6
g1 = 10% t=0 1 2 3 4 5
g2 = 15%
g3 = 20%
Ks = 15% 10%
15%
20%
D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3
D1 = 2(1+0,10)^1 D2 = 2(1+0,10)^2 D3 = 2(1+0,10)^3 Years Dividends PV
D1 = 2,20 D2 = 2,42 D3 = 2,66 d1 2.20 1.91
d2 2.42 1.83
d3 2.66 1.75
D4 = D3(1+g2)^1 D5 = D3(1+g2)^2 D6 = D5(1+g3)^1 d4 3.06 1.75
D4 = 2,66(1+0,15)^1 D5 = 2,66(1+0,15)^2 D6 = 3,52(1+0,20)^1 d5 3.52 1.75
D4 = 3,06 D5 = 3,52 D6 = 4,22 d6 4.22
P5 -84.49 -42.01
P5 = D6 / (Ks-g3)
P5 = 4,22 / (0,15-0,20)
P5 = -84,49 Total -33.01

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

R//. Po = -$33,01

New Data (Budweiser - Infinity)

N= 2 P2
D1 = 2.20 Po=-33,01 d1 d2
D2 = 2.42 t=0 1 2
P2 = 18
Po = -33.01

Valores -33.01 2.20 20.42

TIR -17.95% No, because TIR (-17,95%) is less than K (15%)
 Data (Budweiser - No Growth) P5
Do = 2 Po=? d1 d2 d3 d4 d5
g1 = 10% t=0 1 2 3 4 5 No-Growth
g2 = 15%
Ks = 15%
10%
15%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3

D1 = 2(1+0,10)^1 D2 = 2(1+0,10)^2 D3 = 2(1+0,10)^3 Years Dividends PV
D1 = 2,20 D2 = 2,42 D3 = 2,66 d1 2.20 1.91
d2 2.42 1.83
d3 2.66 1.75
D4 = D3(1+g2)^1 D5 = D3(1+g2)^2 P5 = d5 / Ks d4 3.06 1.75
D4 = 2,66(1+0,15)^1 D5 = 2,66(1+0,15)^2 P5 = 2,66 / 0,15 d5 3.52 1.75
D4 = 3,06 D5 = 3,52 P5 = 2458,06 P5 23.47 11.67

Total 20.66

Po = (€ Dt / (1+Ks)^t) + (Pn / (1+Ks)^n)

R//. Po = $20,66

New Data (Budweiser - No Growth)

N= 2 P2
D1 = 2.20 Po=20,66 d1 d2
D2 = 2.42 t=0 1 2
P2 = 18
Po = 20.66

Valores -20.66 2.20 20.42

TIR 4.88% No, because TIR (4,88%) is less than K (15%)
Using the following financial information taken from the BVG, analyze it:

Security Price FV Coupon / Dividend N Yield g1 g2 P3

Amazonas Bond 92% 100000 4% semiannually 5 years ? 95%
GMac Bond 95% 100000 1,5% quarterly 7 years ? 98%
Holcim Shares 30 10% 15% 12% 10% 42
Bolivariano Shares 10 5% 12% 15% 5% 18

g1 = t1, t2, t3
g2 = infinity

Valuate the securities according the financial information:

a) An investor wants to invest $100000, which of the options are the best for him?, why?
b) Assume 3 years after the investor bought all, another bank offers different prices (P3), would you recommend to buy, why?

Amazonas Bond (1st Part) Amazonas Bond (2nd Part)

FV = 100000 FV = 95000
PV = 92000 PV = 92000
CR = 4% Semi CR = 4% Semi
N= 10 Periods N= 6 Periods

COUPON = 4000 COUPON = 4000

YTM = 5.04% YTC = 4.83%
No, because YTC (4,83%) is less than YTM (5,04%)

GMac Bond (1st Part) GMac Bond (2nd Part)

FV = 100000 FV = 98000
PV = 95000 PV = 95000
CR = 1.50% Quarter CR = 1.50% Semi
N= 28 Periods N= 12 Periods

COUPON = 1500 COUPON = 1500

YTM = 1.73% YTC = 1.82%
 Yes, because YTC (1,82%) is more than YTM (1,73%)

Holcim Shares (1st Part) P3

Do = 3 Po=? d1 d2 d3 d4
g1 = 12% t=0 1 2 3
g2 = 10%
Ks = 15%
12%
D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 10%
D1 = 3(1+0,12)^1 D2 = 3(1+0,12)^2 D3 = 3(1+0,12)^3
D1 = 3,36 D2 = 3,76 D3 = 4,21
Years Dividends PV
D4 = D3(1+g2)^1 P3 = D4/(Ks-g2) d1 3.36 2.92
D1 = 4,21(1+0,10)^1 P3 = 92,73 d2 3.76 2.85
D4 = 4,64 d3 4.21 2.77
d4 4.64
Po = 69,51 P3 92.73 60.97

Total 69.51
Holcim Shares (2nd Part)
N= 3
D1 = 3.36 P3
D2 = 3.76 Po=69,51 d1 d2 d3
D3 = 4.21 t=0 1 2 3
P3 = 42.00
Po = 69.51

Valores -69.51 3.36 3.76 46.21

TIR -8.97%

No, because TIR (-8,97%) is less than Ks (15%)

 Bolivariano Shares (1st Part) P3
Do = 0.5 Po=? d1 d2 d3 d4
g1 = 15% t=0 1 2 3
g2 = 5%
Ks = 12%
15%
D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 5%
D1 = 0,5(1+0,15)^1 D2 = 0,5(1+0,15)^2 D3 = 0,5(1+0,15)^3
D1 = 0,58 D2 = 0,66 D3 = 0,76
Years Dividends PV
D4 = D3(1+g2)^1 P3 = D4/(Ks-g2) d1 0.58 0.51
D1 = 0,76(1+0,05)^1 P3 = 11,41 d2 0.66 0.53
D4 = 0,80 d3 0.76 0.54
d4 0.80
Po = 9,70 P3 11.41 8.12

Total 9.70
Bolivariano Shares (2nd Part)
N= 3
D1 = 0.58 P3
D2 = 0.66 Po=9,70 d1 d2 d3
D3 = 0.76 t=0 1 2 3
P3 = 18.00
Po = 9.70

Valores -9.70 0.58 0.66 18.76

TIR 28.45%

Yes, because TIR (28,45%) is more than Ks (12%)

1.- In The Bolsa de Valores de Guayaquil there is the following financial information available:

Security Po FV Coupon / Dividend / Do N Yield g1 g2

Global 2015 Bond 93.77% 100000 4,5% semiannually 10 years 10%
CFN - Bond 87.44% 10000 2% quarterly 4 years 12%
Holcim Shares 66.50 $3 10% 7% 5%
Holcim Shares 36.13 $3 10% 7% 5%
Tekal Shares 316.76 $40 20% 10% 5%
Tekal Shares 255.14 $40 20% 10% 5%

g1 = 1,2,3 years
g2 = infinity

Analyze the Bonds and Shares and valuate the current market Prices today. In Shares consider g2 (growth rate of 2nd stage)
a) % to infinity and
b) without growing

Assume you bought the bonds and shares at the current market Prices calculated, and 3 years later an important Investment Bank
offers different Prices (P3 column) which of them would you accept, Why?

Global 2015 Bond (1st Part) Global 2015 Bond (2nd Part)
FV = 100000 FV = 99500
PV = ? PV = -93,768.89
CR = 4.50% Semi CR = 4.50%
N= 20 Periods N= 6

COUPON = 4500 COUPON = 4500

Kb = 5.00% Semi YTC = 5.68%

PV = -93,768.89

Yes, because YTC (5,68%) is higher than Kb (5,00%)

 CFN Bond (1st Part) CFN Bond (2nd Part)
FV = 10000 FV = 9500
PV = ? PV = -8,743.89
CR = 2.00% Quarterly CR = 2.00%
N= 16 Periods N= 12

COUPON = 200 COUPON = 200

Kb = 3.00% Quarterly YTC = 2.90%

PV = -8,743.89

No, because YTC (2,90%) is lower than Kb (3,00%)

Holcim Shares (Infinity)

Do = 3
g1 = 7%
g2 = 5%
Ks = 10%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 Years Dividends PV

D1 = 3(1+0,07)^1 D2 = 3(1+0,07)^2 D3 = 3(1+0,07)^3 d1 3.21 2.92
D1 = 3,21 D2 = 3,43 D3 = 3,68 d2 3.43 2.84
d3 3.68 2.76
D4 = D3(1+g2)^1 P3 = D4/(Ks-g2) d4 3.86
D4 = 3,68(1+0,05)^1 P3 = 77,18 P3 77.18 57.98
D4 = 3,86
Total 66.50
Po = 66,50

Valores -66.50 3.21 3.43 33.68

TIR -16.45%
 No, because TIR (-16,45%) is lower than Ks (10%)

Holcim Shares (No Growth)

Do = 3
g1 = 7%
Ks = 10%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 Years Dividends PV

D1 = 3(1+0,07)^1 D2 = 3(1+0,07)^2 D3 = 3(1+0,07)^3 d1 3.21 2.92
D1 = 3,21 D2 = 3,43 D3 = 3,68 d2 3.43 2.84
d3 3.68 2.76
P3 = D3 / Ks P3 36.75 27.61
P3 = 36,75
Total 36.13

Po = 36,13

Valores -36.13 3.21 3.43 33.68

TIR 4.07%

No, because TIR (4,07%) is lower than Ks (10%)

 Tekal Shares (Infinity)
Do = 40
g1 = 10%
g2 = 5%
Ks = 20%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 Years Dividends PV

D1 = 40(1+0,10)^1 D2 = 40(1+0,10)^2 D3 = 40(1+0,10)^3 d1 44.00 36.67
D1 = 44 D2 = 48,40 D3 = 53,24 d2 48.40 33.61
d3 53.24 30.81
D4 = D3(1+g2)^1 P3 = D4/(Ks-g2) d4 55.90
D4 = 53,24(1+0,05)^1 P3 = 372,68 P3 372.68 215.67
D4 = 55,90
Total 316.76
Po = 316,76

Valores -316.76 44.00 48.40 903.24

TIR 50.29%

Yes, because TIR (50,29%) is higher than Ks (20%)

 Tekal Shares (No Growth)
Do = 40
g1 = 10%
Ks = 20%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 Years Dividends PV

D1 = 40(1+0,10)^1 D2 = 40(1+0,10)^2 D3 = 40(1+0,10)^3 d1 44.00 36.67
D1 = 44 D2 = 48,40 D3 = 53,24 d2 48.40 33.61
d3 53.24 30.81
P3 = D3 / Ks P3 266.20 154.05
P3 = 266,20
Total 255.14

Po = 255,14

Valores -255.14 44.00 48.40 903.24

TIR 62.68%

Yes, because TIR (62,68%) is higher than Ks (20%)

2.- In the New York Stock Exchange today, in Bloomberg, there is the following financial information available:

Security Po FV Coupon / Dividend / Do N Yield g1 g2

GM - Bond 88.50% 100000 3% quarterly 4 years 15.94%
Boeing - Shares 100 15% 15% 10% 5%

g1 = 1,2,3 years
g2 = infinity

An important client of Chase Manhattan bank wants to invest $100000, which of the options in the table could be the best alternative, why?

Assume you bought the bonds and shares at the current market Prices, and 2 years later an important investment Bank offers
different Prices (P2 column) which of them would you accept, why?

GM - Bond (1st Part) GM - Bond (2nd Part)

FV = 100000 FV = 95000
PV = 88500 PV = 88500
CR = 3% Quarterly CR = 3%
N= 16 Periods N= 8

COUPON = 3000 COUPON = 3000

YTM = 3.99% Quarterly YTC = 4.18%

Yes, because YTC (4,18%) is higher than YTM (3,99%)

The best alternative is GM - Bond because it offers a better yield (15.94%) than Boeing - Shares (15%)
 Boeing - Shares
Do = 15
g1 = 10%
g2 = 5%
Ks = 15%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 Years Dividends PV

D1 = 15(1+0,10)^1 D2 = 15(1+0,10)^2 D3 = 15(1+0,10)^3 d1 16.50 14.35
D1 = 16,50 D2 = 18,15 D3 = 19,97 d2 18.15 13.72
d3 19.97 13.13
D4 = D3(1+g2)^1 P3 = D4/(Ks-g2) d4 20.96
D4 = 19,97(1+0,05)^1 P3 = 209,63 P3 209.63 137.84
D4 = 55,90
Total 179.04
Po = 179,04

Valores -179.04 16.50 168.15

TIR 1.63%

No, because TIR (1,63%) is lower than Ks (15%)

 P3 Sell / Not Sell
99.5% Sell
95% Not Sell
$30 Not Sell
$30 Not Sell
$850 Sell
$850 Sell

g1 = 1,2,3 years
g2 = infinity

15 Bond (2nd Part)

Semi
Periods

Semi
Bond (2nd Part)

Quarterly
Periods

Quarterly
 P2 Sell / Not Sell
95% Sell
$150 Not Sell

g1 = 1,2,3 years
g2 = infinity

Bond (2nd Part)

Quarterly
Periods

Quarterly

oeing - Shares (15%)

1.- There is the following financial information available:

Security Po FV Coupon / Dividend / Do N Yield g1 g2

Bond N° 1 113.80% 100000 6% semiannually 12 years 10%
Bond N° 2 96.67% 100000 2% quarterly 4 years 9%
Share N° 1 36.21 $3 12% 5% 3%
Share N° 1 28.52 $3 12% 5% 3%
Share N° 2 368.80 $30 14% 7% 5%
Share N° 2 256.58 $30 14% 7% 5%

g1 = 1,2,3 years
g2 = infinity

Analyze the Bonds and Shares and valuate the current market Prices today. In Shares consider g2 (growth rate of 2nd stage)
a) % to infinity and
b) without growing

Assume you bought the bonds and shares at the current market Prices calculated, and 3 years later an important Investment Bank
offers different Prices (P3 column) which of them would you accept, Why?

Bond N° 1 (1st Part) Bond N° 1 (2nd Part)

FV = 100000 FV = 97500
PV = ? PV = -113,798.64
CR = 6.00% Semi CR = 6.00%
N= 24 Periods N= 6

COUPON = 6000 COUPON = 6000

Kb = 5.00% Semi YTC = 3.06%

PV = -113,798.64

No, because YTC (3,06%) is lower than Kb (5,00%)

 Bond N° 2 (1st Part) Bond N° 2 (2nd Part)
FV = 100000 FV = 99000
PV = ? PV = -96,671.84
CR = 2.00% Quarterly CR = 2.00%
N= 16 Periods N= 12

COUPON = 2000 COUPON = 2000

Kb = 2.25% Quarterly YTC = 2.25%

PV = -96,671.84

No, because YTC (2,25%) is equal than Kb (2,25%)

Share N° 1 (Infinity)
Do = 3
g1 = 5%
g2 = 3%
Ks = 12%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 Years Dividends PV

D1 = 3(1+0,05)^1 D2 = 3(1+0,05)^2 D3 = 3(1+0,05)^3 d1 3.15 2.81
D1 = 3,15 D2 = 3,31 D3 = 3,47 d2 3.31 2.64
d3 3.47 2.47
D4 = D3(1+g2)^1 P3 = D4/(Ks-g2) d4 3.58
D4 = 3,47(1+0,03)^1 P3 = 39,75 P3 39.75 28.29
D4 = 3,58
Total 36.21
Po = 36,21

Valores -36.21 3.15 3.31 33.47

TIR 3.62%
 No, because TIR (3,62%) is lower than Ks (12%)

Share N° 1 (No Growth)

Do = 3
g1 = 5%
Ks = 12%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 Years Dividends PV

D1 = 3(1+0,05)^1 D2 = 3(1+0,05)^2 D3 = 3(1+0,05)^3 d1 3.15 2.81
D1 = 3,15 D2 = 3,31 D3 = 3,47 d2 3.31 2.64
d3 3.47 2.47
P3 = D3 / Ks P3 28.94 20.60
P3 = 28,94
Total 28.52

Po = 28,52

Valores -28.52 3.15 3.31 33.47

TIR 13.08%

Yes, because TIR (13,08%) is higher than Ks (12%)

 Share N° 2 (Infinity)
Do = 30
g1 = 7%
g2 = 5%
Ks = 14%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 Years Dividends PV

D1 = 30(1+0,07)^1 D2 = 30(1+0,07)^2 D3 = 30(1+0,07)^3 d1 32.10 28.16
D1 = 32,10 D2 = 34,35 D3 = 36,75 d2 34.35 26.43
d3 36.75 24.81
D4 = D3(1+g2)^1 P3 = D4/(Ks-g2) d4 38.59
D4 = 36,75(1+0,05)^1 P3 = 428,77 P3 428.77 289.40
D4 = 38,59
Total 368.80
Po = 368,80

Valores -368.80 32.10 34.35 886.75

TIR 39.30%

Yes, because TIR (39,30%) is higher than Ks (14%)

 Share N° 2 (No Growth)
Do = 30
g1 = 7%
Ks = 14%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 Years Dividends PV

D1 = 30(1+0,07)^1 D2 = 30(1+0,07)^2 D3 = 30(1+0,07)^3 d1 32.10 28.16
D1 = 32,10 D2 = 34,35 D3 = 36,75 d2 34.35 26.43
d3 36.75 24.81
P3 = D3 / Ks P3 262.51 177.19
P3 = 262,51
Total 256.58

Po = 256,58

Valores -256.58 32.10 34.35 886.75

TIR 58.51%

Yes, because TIR (58,51%) is higher than Ks (14%)

2.- There is the following financial information available:

Security Po FV Coupon / Dividend / Do N Yield g1 g2

Telefonica - Bond 100% 100000 1% quarterly 5 years 4%
Vodafone - Shares 10 4% 6% 10% 5%

g1 = 1,2,3 years
g2 = infinity

An important client of Chase Manhattan bank wants to invest $100000, which of the options in the table could be the best alternative, why?

Assume you bought the bonds and shares at the current market Prices, and 2 years later an important investment Bank offers
different Prices (P2 column) which of them would you accept, why?

Telefonica - Bond (1st Part) Telefonica - Bond (2nd Part)

FV = 100000 FV = 101500
PV = 100000 PV = 100000
CR = 1% Quarterly CR = 1%
N= 20 Periods N= 8

COUPON = 1000 COUPON = 1000

YTM = 1.00% Quarterly YTC = 1.18%

Yes, because YTC (1,18%) is higher than YTM (1%)

The best alternative is Vodafone - Shares because it offers a better yield (6%) than Telefonica - Bonds (4%)
 Vodafone - Shares
Do = 0.4
g1 = 10%
g2 = 5%
Ks = 6%

D1 = Do(1+g1)^1 D2 = Do(1+g1)^2 D3 = Do(1+g1)^3 Years Dividends PV

D1 = 0,4(1+0,10)^1 D2 = 0,4(1+0,10)^2 D3 = 0,4(1+0,10)^3 d1 0.44 0.42
D1 = 0,44 D2 = 0,48 D3 = 0,53 d2 0.48 0.43
d3 0.53 0.45
D4 = D3(1+g2)^1 P3 = D4/(Ks-g2) d4 0.56
D4 = 0,53(1+0,05)^1 P3 = 55,90 P3 55.90 46.94
D4 = 0,56
Total 48.23
Po = 48,23

Valores -48.23 0.44 15.48

TIR -156.21%

No, because TIR (-42,88%) is lower than Ks (6%)

 P3 Sell / Not Sell
97.5% Not Sell
99% Not Sell
$30 Not Sell
$30 Sell
$850 Sell
$850 Sell

g1 = 1,2,3 years
g2 = infinity

N° 1 (2nd Part)

Semi
Periods

Semi
N° 2 (2nd Part)

Quarterly
Periods

Quarterly
 P2 Sell / Not Sell
101.50% Sell
$15 Not Sell

g1 = 1,2,3 years
g2 = infinity

a - Bond (2nd Part)

Quarterly
Periods

Quarterly

Telefonica - Bonds (4%)