Professional Documents
Culture Documents
Bond Valuation Examples
Bond Valuation Examples
n
I MV
Coupon 8% Value
t 1 (1 r ) t
(1 r ) n
Face Value 100
Maturity 5 (years)
Maturity Value 125
Year
1 2 3 4 5
Future Cash Flow 8 8 8 8 133
The Present Value is the price that the company can realistically expect to "sell" its bond for.
Coupon 0% MV
Value
Face Value 100 (1 r ) n
Maturity 5 (years)
Maturity Value 172.88
Year
1 2 3 4 5
Future Cash Flow 0 0 0 0 172.88
The Present Value is the price that the company can realistically expect to "sell" its bond for.
Perpetuity
I
Value (1 r ) t
I /r
Coupon 10% t 1
Face Value 100
Maturity ¥ (years)
Market Yield for a bond of the same risk and maturity: 12%
The Present Value is the price that the company can realistically expect to "sell" its bond for.