Name:Reynan Pasco BSBA/3A

Subject:Investment and Porfolio Management

Bond Valuation

n
M
Vb =∑❑∫¿¿
t =1 ¿ ¿ 1+ K d

A year bond was released by Pasco Corp. company, Interest is paid at 5% annually with par value of P
13,000.

Given:
t = 5years; k d= 13% ; M = 13,000

INT=Php13000x5%=Php. 65000

N
∫¿ M
V b =∑ ¿ 1 ¿+
T=1 (1+k d )¿ t
(1+k d )¿ n

650 650 650 650 650 650

Vb = 1 + 2 + 3 + 4 + 5 +
(1+.05) (1+.05) (1+.05) (1+.05) (1+.05) (1+.05)5

V b = 619.05+589.57+561.49+534.75+509.29+10,185.84
V b= 12,999.99

However if there movement or a changes in the interest rate the value or a price of the bond will
also change.

If the coupon interest rate will increase 7% the value or the bond will be 11,933.95

n
M
Vb =∑❑∫¿¿
t =1 ¿¿ 1+ Kd

650 650 650 650 650 650 13,000

Vb = + + 3 + 4 ++ 5 + 6 ++
(1+.07) (1+.07) (1+.07) (1+.07) (1+.07) (1+.07) (1+.07)
V b = 607.48+567.74+530.59+495.88+463.44+9268.82

V b =Php11,933.95