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Act. 7

The document outlines various bond calculations including yield determination and pricing based on interest rates and payment structures. It provides examples of bonds with different face values, interest rates, and payment frequencies, demonstrating how to calculate the present value and yield. The final example calculates the total semiannual expense for a bond issue using a sinking fund and interest payments.

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23 views6 pages

Act. 7

The document outlines various bond calculations including yield determination and pricing based on interest rates and payment structures. It provides examples of bonds with different face values, interest rates, and payment frequencies, demonstrating how to calculate the present value and yield. The final example calculates the total semiannual expense for a bond issue using a sinking fund and interest payments.

Uploaded by

banghaonestephanie
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

SOLUTION

i = 0.07
−10
1−( 1+0.07 )
P = PHP 80 + PHP 1 000 ( 1+0.07 )−10 ¿
0.07
P = PHP 1 070.24

❑
1070.24−1030
i = 0.07 + (0.08 – 0.07)
1070.24−1000
i = 0.0757

i = 7.57%

PAGE 7
4. A PHP 1,000 BOND WHICH WILL MATURE IN 10 YEARS AND WITH A BOND RATE OF 8% PAYABLE ANNUALLY IS TO
BE REDEEMED AT PAR AT THE END OF THIS PERIOD. IF IT IS SOLD AT PHP 1,030, DETERMINE THE YIELD AT THIS
PRICE?
GIVEN:

C = PHP 1 000

r =8%=0.08

P = PHP 1 030

UNKNOWN:

SOLUTION

I = Fr

I = (PHP 1 000)(0.08)

I = PHP 80

−n
1−(1+i) + −n
P=I C (1+i) ¿
i
−10
1−( 1+i ) +
PHP 1 030 = PHP 80 PHP 1 000 ( 1+i )−10 ¿
i

i = 0.08
−10
1−( 1+0.08 ) +
P = PHP 80 PHP 1 000 ( 1+0.08 )−10 ¿
0.08
P = PHP 1 000

PAGE 7
3. MR. ROMUALD BOUGHT A BOND HAVING A FACE VALUE OF PHP 1,000 FOR PHP 970. THE BOND RATE WAS 14%
NOMINAL AND INTEREST PAYMENT WERE MADE TO HIM SEMIANNUALLY FOR A TOTAL OF 7 YEARS. AT THE END OF
THE SEVENTH YEAR, HE SAID THE BOND TO BE A FRIEND AT A PRICE THAT RESULTED A YIELD OF 16% NOMINAL ON
HIS INVESTMENT. WHAT WAS THE SELLING PRICE?
GIVEN:

F = PHP 1 000

16
r= =8%=0.08
2
14
i= =7%=0.07
2
n = (7)(2) = 14

UNKNOWN:

SOLUTION

I = Fr

I = (PHP 1 000)(0.07)

I = PHP 70

−n
1−(1+i) + −n
PHP 970 = I C (1+i ) ¿
i
−14
1−( 1+0.07 ) +
PHP 970 = PHP 70 C ( 1+0.07 )−14 ¿
0.07
C = PHP 922.64

PAGE 7
2. A MAN WANTS TO MAKE 14% NOMINAL RATE INTEREST COMPOUNDED SEMIANNUALLY ON A BOND INVESTMENT.
HOW MUCH SHOULD THE MAN BE WILLING TO PAY NOW FOR A 12% PHP 10,000 BOND THAT WILL MATURE IN 10
YEARS AND PAYS INTEREST SEMIANNUALLY?
GIVEN:

F = PHP 10 000

14
i= =7%=0.07
2
12
r= =6%=0.06
2
n = (10)(2) = 20

UNKNOWN:

SOLUTION

I = Fr

I = (PHP 10 000)(0.06)

I = PHP 600

−n
1−(1+i) −n
P=I +F (1+i ) ¿
i
−20
1−( 1+0.07 )
P = PHP 600 + PHP 10 000 ( 1+0.07 )−20 ¿
0.07
P = PHP 6356.41 + PHP 2584.19

P = PHP 8940.60

PAGE 7
E N G I N E E R I N G E C O N O M I C S

BUQUING, SANSHINE T. OCTOBER 10, 2025


BSCE 3B SCORE:

1. A BOND ISSUE OF PHP 200,000 IN 10-YEAR BONDS, IN PHP 1,000 UNITS, PAYING 16% NOMINAL INTEREST IN
SEMIANNUAL PAYMENTS. MUST BE RETIRED BY THE USE OF A SINKING FUND THAT EARNS 12% COMPOUNDED
SEMIANNUALLY. WHAT IS THE TOTAL SEMIANNUAL EXPENSE?
GIVEN:

F = PHP 200 000

16
r= =8%=0.08
2
12
i= =6%=0.06
2
n = (10)(2) = 20

UNKNOWN:

TOTAL SEMIANNUAL EXPENSE


SOLUTION

F
n
A= (1+i) −1
i
PHP 200 000
20
A= (1+ 06) −1
0.06
PHP 200 000
20
A= (1.06) −1
0.06
A = PHP 5436.91

I = Fr

= (PHP 200 000)(0.08)

I = PHP 16 000

TOTAL SEMIANNUAL EXPENSE = PHP 5436.91 + PHP 16 000

TOTAL SEMIANNUAL EXPENSE = PHP 21 436.91

PAGE 1

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