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Illustration 1:
• Vd = R/Kd
• = 60/10
• = Rs. 600
Illustration 4
• An investor holds a debenture of Rs. 100
carrying a coupon rate of 12% p.a. The interest
is payable half-yearly on 30th June and 31st
December every year.
• The maturity period of the debenture is 6
years and it is to be redeemed at a premium
of 10%. The investor’s required rate of return
is 14% p.a. Compute the value of the
debenture
Solution:
• Vd = (R/2)(ADFi/2,2n) + M (DFi/2,2n)
• 12/2(7.943) + 110(.444)
• 47.658 + 48.840
• Rs. 96.498 or say Rs. 96.50
Illustration 5
• Vd = R/kd
• or kd = R/Vd
• or kd = 60/600 = .10
• Thus, the yield to maturity is 10%.