Consider a 10 year, 12 % coupon bond with a face val

yield on this bond is 13%. The cash flows for this bond

Yield >CR
FV 1000
CR 12%
COUPON 120
NPER 10
yield 13%

1 PV 946

Required yield on investment = Expected Interest rates in econo

2 Current Yield 12.7%

=D12/D16
•Coupon Rate = Required (Market) Rate or Yield, bond sells at p
•Coupon Rate > Required (Market) Rate or Yield, bond sells at p
•Coupon Rate < Required (Market) Rate Yield, bond sells at disc

Consider a 10 year, 12 % coupon bond with a face value of Rs.1

 Consider a 10 year, 12 % coupon bond with a face value of Rs.1
1123 find Yield to Maturity

FV 1000
PV 946
NPER 10
CR 12%
COUPON 120

3 YTM 13%

BUY
• At a premium: Coupon Rate > YTM
• At par: Coupon Rate = YTM
• At a discount: Coupon Rate < YTM

4 YR Bond 8% CR, 1000 FV, Redeemable @1200, PV =1050

Val of Bond @ 10%

Years CFs
1-4 80
4 1200
Market value of bond=
Intrinsic val of Bond =

Years CFs
1-4 80
4 1200

Market value of bond=

Intrinsic val of Bond =

10%
1073.21

1%
?

YTM = 10% + 0.67% = 10.67%

on bond with a face value of Rs.1000. The required
ash flows for this bond are: (12%NCD 10 yr, 1000)

Yield =CR Yield <CR Yield = expected rate

1000 1000
12% 12%
120 120
10 10
12% 10%

1000 1123

pected Interest rates in economy

12% 10.7% COUPON/PRICE

) Rate or Yield, bond sells at par

) Rate or Yield, bond sells at premium
) Rate Yield, bond sells at discount

bond with a face value of Rs.1000. the Current price of Bond is 946, 1000,
 1000 1000
1000 1123 PV INVERSEL
10 10
12% 12%
120 120

12% 10% YTM : REINVESTMENT

Coupon Rate > YTM

n Rate = YTM
Coupon Rate < YTM

eemable @1200, PV =1050 10.67% =RATE(4,80,-1050,1200,0)

PV factor 10% PV of CF TRIAL ERROR , INTERPOL

3.1699 253.592
0.6830 819.6161
1073.208
 1073.21 IRR
bond= 1050.00 RATE
1073.21 YTM

PV factor 11% PV of CF
3.10245 248.196
0.6587 790.4772
1038.673

bond= 1050.00
1038.67

1% 11%
34.53 1038.67

23.21

34.53
23.21

=23.21/34.53 X 1 = 0.67%

M = 10% + 0.67% = 10.67%

= expected rate= prevailing interest rate.

PON/PRICE
 PV INVERSELY RELATED INTEREST RATE/DISCOUNT

VESTMENT

PV 1050
FV 1000
RED VAL 1200
CR 8%
-1050,1200,0) COUPON 80
NPER 4

OR , INTERPOLATION