Alvarez, Paul John Submitted to:

Bagang, Alessandra Francheska Dr. Christhoffer Lelis

Lavarias, Febbie Novem
(BSA 3B)

Given:
Bond C Bond Z
Par value $1,000.00 $1,000.00
Coupon interest rate 10%
Interest payment per year 1
Annual interest payment $100.00
Required rate of return 9.60% 9.60%
Number of years to maturity 4 4
Bond value ? ?

Bond C
t Par Value PV factor Interest PV of interest
0 $693.04 1 $100.00 $100.00
1 $759.57 0.91240876 $100.00 $91.24
2 $832.49 0.83248974 $100.00 $83.25
3 $912.41 0.75957093 $100.00 $75.96
4 $1,000.00 0.69303917 $100.00 $69.30

Bond Z
t Par Value
0 $693.04
1 $759.57
2 $832.49
3 $912.41
4 $1,000.00
Value of Bond
$1,012.79
$1,010.02
$1,006.98
$1,003.65
$1,000.00
 3 1
4 1.5
5 2.25
SUM of PV from year 3 to 5

6 onwards 34.714285714
I 15%

Total
 PV
0.6575162324
0.8576298684
1.1186476544
2.6337937552

17.25913524

19.892928995
ASSET A
Required Return 18%

Year Cash Flow

1 $5,000.00
2 $5,000.00
3 $5,000.00

ASSET VALUE (PV (1-3))

Using NPV formula (shortcut)

ASSET B
Required Return 15%

Year Cash Flow

1 onwards (to infinity) $300.00

ASSET VALUE (PV (1 onwards))

 PV
$4,237.29
$3,590.92
$3,043.15

$10,871.36
$10,871.36

$2,000.00