Valuation of Bonds & Shares

1) Calculate the value of an asset if the annual cash inflow is Rs.2,000 per year for the
Next 7 years and the discount rate in 18.
2) ! "ond whose par value is Rs. 1,000 "ears a coupon rate of 12 and has a #aturity
period of $ years. %he re&uired rate of return on the "ond is 10. 'hat is the value of
this "ond.
$) Consider the case where an investor purchase a "ond whose face value is Rs. 1,000
#aturity period is ( years and the no#inal )coupon) rate of interest is 7. %he re&uired
rate of return is 8. 'hat should he "e willin* to pay now to purchase the "ond if it
#atures at par.

+) ! "ond of Rs. 1,000 value carries a coupon rate of 10 and a #aturity period of
,years. -nterest is paya"le se#i.annually. -f the re&uired rate of return is 12, calculate
the value of the "ond.
() / purchased Rs. 1,000 par value "ond for Rs.000. %he coupon pay#ent on this "ond is
Rs. 8. 1ne year later he sells the "ond for Rs. 800. %he rate of return of 2r. / for this
1ne year period is

, ) Consider a Rs. 1,000 par value "ond whose current #ar3et price is Rs. 8(0. %he "ond
carries a coupon rate of 8 and has a #aturity period of 0 years. 'hat would "e the
rate of return that an investor earns if he purchases the "ond and holds till #aturity.
7) %he "ond of 4eta -ndustries 5i#ited with a par value of Rs. (00 is currently traded at
Rs. +$(. %he coupon rate is 12 and it has a #aturity period of 7 years. 'hat is the yield
to #aturity.
8) Consider a "ond of 6en 7tar -nter#ediaries 5i#ited with the followin* features8
9ar :alue 8 Rs 100 Coupon Rate 8 12 ;ears to 2aturity 8 ( years
<ind our the value of 6enstar =onds if the re&uired rate of return is
i) 12 , ii) 1+ and iii) 10
0) %he ;%2 of a Rs. 1,000 par value "ond "earin* a coupon rate of 10 and #aturin*
on 10 years is 12. %hus, the #ar3et value of the "ond is

10 ) ! "ond has $ years re#ainin* until #aturity. -t has a par value of Rs. 1000. %he
coupon interest rate on the "ond is 10. Co#pute the yield to #aturity at current #ar3et
price of )i) Rs. 1,100 )ii) Rs. 000, assu#in* interest is paid annually.
11) ! note )secured pre#iu# note) is availa"le for Rs. 1+00. -t offers, includin* one
i##ediate pay#ent, 10 annual pay#ents of Rs. 210. Co#pute the rate of return )yield) on
the note.
12 ) !ssu#e )i) Rs.100 par value )ii) 8 per coupon rate of interest and )iii) 10 years
re#ainin* to #aturity date
-f interest is paid annually, find the value of the "ond when the re&uired rate of return is )a)
7 )") 8 and )c) 10. -ndicate for each case whether the "ond is sellin* at a discount, at
a pre#iu# or at it>s par value ?sin* 10 re&uired rate of return what would "e the value
of the "ond if interest is paid se#iannually.

1$ ) %he "onds of !lert 5i#ited currently sell at Rs. 11(. %hey have a 11 coupon rate of
interest and Rs. 100 par value. %he interest is paid annually and the "onds have 18 years to
#aturity. Co#pute the yield to #aturity of the "ond. Co#pare the co#pute ;%2 with
coupon interest rate @ow do you explain the difference "etween the current price and the
par value of the "ond
1+ Calculate =eta of the 7ecurity
;ear Return of 2ar3et Return of 7ecurity
1081 1( 1,
1082 1+ 12
108$ 17 10
108+ 1, 18
108( 1$ 1(
1(
9eriod Return of 2ar3et Return of 7ecurity
1 $0 $(
2 28 $0
$ 2( 18
+ 20 1(
( 2+ 20
, 10 11
7 $ .10