Bond valuation – problem set

1. If the annual coupon payments are Tk. 6.5 and the face value of a bond is Tk.100, what is its
coupon rate?

2. If the annual coupon payments are Tk.125 and the face value of a bond is Tk. 1,000, what is its
coupon rate?

3. A bond has a $1,000 face value and provides a 7% annual coupon for 14 years. The appropriate
discount rate is 8%. What is the value of the bond?

4. A bond has a Tk.100,000 face value and provides a 5% annual coupon for 6 years. The
appropriate discount rate is 7%. What is the value of the bond?

5. A bond has a $1,000 face value and provides a 6% coupon (3% semi-annually) for 5 years. The
appropriate discount rate is 10% (annual rate). What is the value of the coupon bond?

6. A bond has a Tk. 100,000 face value and provides a 10% coupon (5% semi-annually) for 4
years. The appropriate discount rate is 6% (annual rate). What is the value of the coupon bond?

7. A bond has a $100 face value and a 30-year life. The appropriate discount rate is 5%. What is
the value of the zero-coupon bond?

8. A bond has a Tk. 100,000 face value and a 2-year life. The appropriate discount rate is 24%.
What is the value of the zero-coupon bond?

9. A bond has a $100 face value and provides an 11% coupon. The appropriate discount rate is
10%. What is the value of the perpetual bond?

10. A bond has a Tk. 100,000 face value and provides a 4% coupon. The appropriate discount rate
is 25%. What is the value of the perpetual bond?

11. Your firm has an issue of 10% annual coupon bonds with 6 years left to maturity. The bonds
have a current market value of $1,200 and a face value of $1,000. What is the bond’s yield-to-
maturity?

12. Your firm has an issue of 6% annual coupon bonds with 9 years left to maturity. The bonds
have a current market value of Tk. 85,000 and a face value of Tk. 100,000. What is the bond’s
yield-to-maturity?
 Solution:

1. 6.50%

2. 12.50%

3. $917.59

4. Tk 90,462.50

5. $845.55

6. Tk 114,038.50

7. $23.14

8. Tk 64,000.00

9. $110.00

10. Tk 16,000.00

11. 5.94%

12. 8.46%