Corporate Finance
Essay by people • June 9, 2011 • Essay • 287 Words (2 Pages) • 1,822 Views
Sample Bond Valuation problems and MCQs.
Bond Valuation
A bond has a $1,000 face value and provides a 10% annual coupon for 10 years. The
appropriate discount rate is 8%. What is the value of the bond? Also calculate the current yield and the capital gain yield of the bond.
Semi-annual
A bond has a BDT 100,000 face value and provides a 10% semi-annual coupon for 11
years. The appropriate discount rate is 24% (annual rate). What is the value of the coupon bond?
Zero-coupon bond problems:
A bond has a $1,000 face value and a 10-year life. The appropriate discount rate is 12%.
What is the value of the zero-coupon bond?
Perpetual bond problems:
A bond has a $1,000 face value and provides a 10% coupon. The appropriate discount
rate is 25%. What is the value of the perpetual bond?
Yield-to-maturity (YTM) problems:
A bond pays a 10% annual coupon, and has 15 years left to maturity. Its current market
value is $6155. What is the bond's YTM?
A bond pays a 6% annual coupon, and has 10 years left to maturity. Its current market
value is $866. What is the bond's YTM?
MCQ
If the market price of a bond is Tk 1100, paying a coupon of 10% and has maturity of 30 years. What will be the YTM?
a) 11.55
b) 9.025
c) 10.5
d) 10.35
A stock that does not have a maturity is termed as
a) Zero-coupon bond
b) Consol bond
c) Perpetual bond
d) Callable bonds
If you buy a bond today with maturity of 10 years and the issuing company calls it back from you after 5 years, the return from this bond is called
a) Yield to maturity
b) Yield
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