Corporate Finance

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