FMI ASSIGNMENT 5

Kindly refer to the Excel sheet for Research Q 2 & 3.

Ind PS Bonds A1

Q 18

The bonds are priced at Par value.

Coupon Rate= 7% Semi annually
The effective rate is:-
=(1+r/n)^n -1
=(1+0.07/2)^2-1 =7.12%

Thus, the answer is greater than 7 percent

Q 28

E) real rate, inflation premium, interest rate risk premium, and the liquidity premium.

A yield curve or Term Structure rate is a way to measure bond investors' feelings about risk, and can have a
tremendous impact on the returns you receive on your investments.

Q 38

Given that, FV= $1,000

Rate/ YTM = 7.73% ÷ 2 = 3.865%
Term = 9 years × 2 = 18 years
Coupon = ($1,000 × 6%) ÷ 2 = $30

The formula in EXCEL = -PV(Rate;NPER;PMT;FV;type)

So, after solving this, the market price of a bond is $889.29

Please refer the attached Excel Sheet

Q 48

Ans: $1,016.33
Quoted price means it is trading at 101.633 % of face value.
Face Value $1000
Market Price= $1,016.33
Q58

Face Value- $1000

Market Price= $ 994.86

Coupon Rate= 5.6%

Semi Annually

If a bond is quoted at 99.486, this indicates that it is 99.486% of the bond's par value. Therefore, if the bond's par value
is $1,000, the bond price is $994.86. The $994.86 price quote is the clean price of the bond since it does not reflect the
accrued interest on the bond.

BMI Book
Q34

YTM = is y , coupon payment = C

The duration of the bond is supposed to be

Duration of the bond = Σ (Present value of time weighted cash flows)/Σ (Present value of cash flows)
1∗C 2∗C 3∗C
+ + +…
(1+ y) (1+ y )2 (1+ y )3
D=
C C C
+ + +…
(1+ y) (1+ y ) (1+ y )3
2

C
The numerator is represents the present value of a perpetuity=
y
Therefore , we can say Denominator
1 1 1
+ + +… = 1 (i)
(1+ y ) (1+ y )2 (1+ y )3 y

Numerator,
1 2 3
Suppose, S= + + +… (ii)
(1+ y ) (1+ y ) (1+ y )3
2

2 3
Then, (1+y)*S = 1+ ❑+ +… (iii)
(1+ y ) (1+ y )2

Eq (ii)-(iii),

2−1 3−2 4−3

(1+y)*S – S = 1 + + + +…
(1+ y ) (1+ y ) (1+ y )3
2

1 2 3
S*y = 1 + + + +…
( 1+ y ) ( 1+ y ) ( 1+ y )3
2

1
S*y = 1 + (from (i))
y
1
1+
S= y
y
 1
Replacing the values in the duration equation by S and , we get
y
1
C∗1+
y
D= y
C
y
Eliminating c,

1+ y
D= Hence Proved
y

Q17

With respect to US Treasury Bonds,

a. Spot Interest Rates come first, before Yield to Maturity: The spot rate is the rate of return that is earned by a
bond when it is traded on the secondary market, without collecting interest payments.
Whereas YTM is the total annual rate of return, which is earned at the end of the bond maturity after collecting all the
cashflows and the original amount.
YTM is the weighted average of spot rates, so in order to calculate YTM we need Spot interest rate first. Therefore, we
can conclude that Spot Rates come before YTM

b. Bond Prices come first, before Yield to Maturity:

The bond price is calculated from the cash flows generated from the bond, and the spot interest rates. Once we
calculate the bond price, only then it will be possible to calculate the yield to maturity of the bond, Hence, bond prices
come first before yield to maturity.

Research Questions
Q1

Summit Digitel Infrastructure, supporting telecom towers used by Reliance Jio Telecom Giant, raised $500 million
via overseas bonds on Wednesday, Aug 04 2021. It is being raised for capital expenditure and repayment of already
existing high-cost debt. These bonds with 10-year maturity were finally priced after adding 187.5 basis points
spread over the US Treasury benchmark. Bank of America, Barclays Citigroup, and HSBC are among others that
helped the company raise the funds.

Read more at:

https://economictimes.indiatimes.com/markets/bonds/summit-digitel-raises-500-mn-via-maiden-offshore-bonds/
articleshow/85048722.cms
Q4

COMPANY 1: ITC Limited

Instrument: Bonds, Debentures, Bank Loans
Long Term Rating: CRISIL AAA/Stable

The ratings reflects a good risk profile due to the presence of the organization in diverse businesses, a
dominant position in the Indian cigarette market, hotels and FMCG market. The ratings also factor in an
exceptionally strong financial risk profile.

ITC has evolved from a pure tobacco company into a well-diversified business conglomerate, with a strong
presence in paperboards, printing and packaging, agricultural commodities, hotels, branded packaged foods,
personal care products, stationery and other fast-moving consumer goods (FMCGs). 

Source: https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/ITCLimited_March
%2022,%202021_RR_266798.html

COMPANY 2: Hindustan Unilever Limited

Instrument: Bonds, Debentures, Bank Loans
Long Term Rating: CRISIL AAA/Stable

HUL has a healthy business and financial risk profiles because of its focused effort on diversed area brand
strengthening, increased advertising, and focus on building premium offerings
It is the largest FMCG companies in India with strong brands across categories and price points.

Source:
https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/
Hindustan_Unilever_Limited_November_04_2020_RR.html

Q5
Issue Mode: Publicly Traded
Type of Instrument: Long Term Investment
INSTRUMENT: Muthoot Finance Income NBFC Bond
ISIN NUMBER: INE414G07FU6
MINIMUM INVESTMENT ₹₹10,29,572.60
PAYMENT : Annually
FACE VALUE : ₹1,000.00
YIELD TO MATURITY: 7.68%
LISTED Yes
MATURITY DATE Apr 20, 2021
DATE OF ISSUE Apr 20, 2026
INTEREST EARNED :₹ 3,92,500.00
TOTAL RETURNS : ₹13,92,500.00
CRISIL RATING: AA+

Comments: Being an AA+ CRISIL rated instrument, it has a stable outlook which makes it a
good investment in long term duration with Coupon rate at 7.85%

Sources: https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/
MuthootFinanceLimited_February%2023,%202021_RR_265604.html

https://bondskart.com/bonds/regular-income-nbfc-bond-by-muthoot-finance-
limited_INE414G07FU6