1. Present value of future CFs is value of Bond.

∑C/(1+r)^n
2
PVIFA(8%,9) 6.2469 1124.89 $1,124.94
PVIF 0.5002
3
PVIFA (4%,18) 12.659 1126.55 $1,126.59
PVIF 0.4936
4 (cpn+(Face value-market price)/n)/0.4*m+0.6*p
8.90% 8.89%
5 (cpn+(face value-price)/n)/((face value+price)/2)
8.94%
6 (cpn+(Face value-market price)/n)/0.4*m+0.6*p
9.52% 9.52%
7
FVIFA (8%,6) 7.3359 1733.59
D*(1+r)^n=FV
1050*(1+r)^6=1733.59
1+r^n 1.651038 1733.59
1.087158
r 0.087158
8 0.076923 0.012508
0.075758 -0.075758
9 Annual percentage is rate of interest on investment/borrowing
Effective annual yield is total we get from investment. It considers compounding as well.
10 Interest rate risk is risk of bond losing its value because of giving less interest. Reinvestment risk is investors no
11 Debt-to asset ratio
Debt to Equity ratio
Debt to capital ratio
Asset to Equity ratio
12 Yield curve is line showing yields (int. rate) of bonds having equal credit quality but differing maturity date
13 Credit rating
loan term
compounding
Debt ratio
Reinvestment risk is investors not being able to find similar paying investment.

y but differing maturity date

Ravi Rao is the Chief Executive Officer of Capmart Limited, an investment advisory firm. Ravi Rao has bee
How is the value of a bond calculated?
What is the value of a 9-year, Rs 1,000 par value bond with a 10 percent annual coupon, if its required rate
What is the value of the bond described in part (b) if it pays interest semi-annually, other things being equa
What is the YTM of a 6-year, Rs 1,000 par value bond with a 10 percent annual coupon, if it sells for Rs 1,
What is the YTM of the bond described in part (d) if the approximate formula is used?
What is the yield to call of the bond described in part (d)if the bond can be called after 3 years at a premium
What is the realized yield to maturity of the bond described in part (d) if the reinvestment rate applicable to
The holders of the bond described in part (d) expect that the bond will pay interest as promised, but on ma
What is the difference between the annual percentage rate and the effective annual yield?
What is the difference between interest rate risk and reinvestment risk?
List the key financial ratios that have a bearing on debt rating.
What is a yield curve?
What factors determine interest rates?
 ry firm. Ravi Rao has been requested to give a seminar to a group of finance executives drawn from state run univer

coupon, if its required rate of return is 8 percent?

y, other things being equal?
oupon, if it sells for Rs 1,050?

after 3 years at a premium of Rs 50?

estment rate applicable to the future cash flows from the bond is 8 percent?
t as promised, but on maturity bondholders will receive only 90 percent of par value. What will be difference between
awn from state run universities. He has been requested to explain the basic concepts and tools useful in bond analys

will be difference between the expected YTM and stated YTM? Use the approximate YTM formula.
ools useful in bond analysis. Ravi Rao has asked you to help him to make his presentation. In particular, you have to
In particular, you have to answer the following questions.