Practice Problem – Chapter 6 (Source: Financial Management Volume 1 by Ivan Yannick S.

Bagayao,
Alexis Deo C. Manalo, Apollo C. Layug)

Panda Mining Corporation issued a ten-year, P1,000 non-convertible bond which pays annual couponof
P80 on January 1, 2016.

Assume that the bond with similar risk yield at a rate of 8%:

1. Is the bond issued at a face, at a premium or at a discount?

2. What is the value of the bond upon issuance?
3. Determine the value of the bond 5 years after issuance.
4. What is the amount of interest expense paid on December 31, 2016?
5. What is the value of the bond at maturity?
Assume that the yield to maturity on the said bond is 9% instead of 8%:
6. What is the value of the bond upon issuance on January 1, 2016?
7. What is the value of the bond on January 1, 2018?
8. What is the amount of interest expense paid on December 31, 2016 and 2017?
9. What is the value of the bond on December 31, 2023?
10. What is the value of the bond on December 31, 2025?
Assume that the yield to maturity on the said bond is 7% instead of 8%:
11. What is the value of the bond upon issuance on January 1, 2016?
12. What is the value of the bond on January 1, 2018?
13. What is the amount of interest expense paid on December 31, 2016 and 2017?
14. What is the value of the bond on December 31, 2023?
15. What is the value of the bond on December 31, 2025?