BFM/FBFM 1024 FINANCIAL MANAGEMENT

SUBMISSION 2 : BOND VALUATION

1. Super Supreme Berhad just issued 225,000 zero coupon bonds. These bonds mature in 20
years, have a par value of $1,000, and have a yield to maturity of 7.45 percent. What is
the approximate total amount of money the company raised from issuing these bonds?
(Assume semiannual compounding.) $52.10 million

2. A $1,000 face value bond currently has a yield to maturity of 6.69 percent. The bond
matures in 3 years and pays interest annually. The coupon rate is 7 percent. What is the
current price of this bond? $1,008.18

3. A 5.5 percent $1,000 bond matures in seven years, pays interest semiannually, and has a
yield to maturity of 6.23 percent. What is the current market price of the bond? $959.09

4. Thomas Builders, Inc. has 12-year bonds outstanding with a face value of $1,000 and a
market price of $974. The bonds pay interest annually and have a yield to maturity of
4.03 percent. What is the coupon rate? 3.75 percent
[couponprnt)
1. CR 0, cp 0 ,t 20 years, PV=1800, YTM=7.45%
=

= =

:Semi (CR?2 0)
=

Ctx2 403=
(YTM +
2 3.72550)
=

3v
(*) st Total Capital 225000 x 231.56
= =

52108846.33
=

=0 i5,4
+

$231.56

2. FV 1000,
= YTM 6.6970,
=

t = 3years, CR=770, PP:70

3v
70(89)
=

as
+

=$1008.18 (premium Bonds (YTM TCR, price > pv]

3. (R= 5.5%, C=$55,t= 7, YTM 6.23% =

(5.542=2.75)(5522:27.5)(7x2:14) (6.23:2 3.1157)

=

BV 2750
=

(oss) t -

=$959.89 (discount Bond) (price <PV, XTM >

cR]
 =0.0403
t 2, FV 1000, BU=974, fTM 4.037.
= =
=

3r:1
ins), st 37-52
C=CRxPV

=
CR 1000
x

974= c
( re") -
oss CR 0.03852
=

= 3-75)
974 c(9.3688)
=

(622.44)
+

974 -

622.44 :((9.3688)

C 37.52
=