Bond Valuation Practice Problems. The $1,000 face value ABC bond has a coupon rate of 6%, with interest paid semi-annually, and matures in 5 years. If the bond is priced to yield 8%, what is the bond's value today? The $1,000 face value EFG bond has a coupon of 10% (paid semi-annually), matures in 4 years, and has current price of $1,140. Valuation Problems: Stocks, Bonds, and Other Investments. 1. What is the value of the two investments: a. Stock in which you expect a dividend of $300 a year indefinitely. You feel you should obtain a 10% return based on the risk you are taking. Solution: $3,000. b. Painting that you expect to sell for $300,000 in 5 years. practice bond valuation problems Essay. MBA 8135 Practice Bond Valuation Problems SOLUTIONS 1. Calculate the current price of a $1,000 par value bond that has a coupon rate of 6% p.a., pays coupon interest annually, has 14 years remaining to maturity, and has a yield to maturity of 8 percent. Bond Terms. Horse Rocket Software has issued a five-year bond with a face value of $1,000 and a 10% coupon rate. Interest is paid annually. Similar bonds in the market have a discount rate of 12%. Practice Bond Valuation Problems SOLUTIONS 1. Calculate the current price of a $1,000 par value bond that has a coupon rate of 6% p.a., pays coupon interest annually, has 14 years remaining to maturity, and has a yield to maturity of 8 percent. PMT = 60; FV = 1000; N = 14; I = 8; CPT PV = 835.12 2. Here we need to find the coupon rate of the bond. All we need to do is to set up the bond pricing equation and solve for the coupon payment as follows: P = $948 = C(PVIFA5.90%,8) + $1,000(PVIF5.90%,8) Solving for the coupon payment, we get: C = $50.66 The coupon payment is the coupon rate times par value.

## INTEREST RATES AND BOND VALUATION Solutions to Questions and Problems 1. The price of a pure discount (zero coupon) bond is the present value of the par value. Remember, even though there are no coupon payments, the periods are semiannual to stay consistent with coupon bond payments. So, the price of the bond for each YTM is: a.

10 Jun 2019 Cost of equity is an important input in different stock valuation models such as Risk free rate is the rate of return on 10-year Treasury Bond. Examples: – Stock: What is the Bond: what is the value of a bond that gives a certain amount of coupon The simplest stock valuation model – the Gordon. G h M d l l h. k b di example, move into a different business. • 2. Steady growth: The valuation of bonds is a relatively straightforward process because future cash To illustrate the use of Equation, consider the following example. In this problem, the annual required rate of return (kd = .08) is divided by 2(.08/2 These bond values differ only slightly from the solutions obtained for annual interest 15 Jan 2001 For example, you could use the rate of return on long-term. Treasury bonds or high-grade corporate issues as a starting point in defining your Problems *Note: P1 through P5 deal with bond valuation. P6 through P11 deal with stock valuation. P1. Bennifer Jewelers just issued ten-year bonds that make annual coupon payments of $50. Suppose you purchased one of these bonds at par value ($1,000) when it was issued. Bond Valuation Practice Problems. The $1,000 face value ABC bond has a coupon rate of 6%, with interest paid semi-annually, and matures in 5 years. If the bond is priced to yield 8%, what is the bond's value today? The $1,000 face value EFG bond has a coupon of 10% (paid semi-annually), matures in 4 years, and has current price of $1,140. Valuation Problems: Stocks, Bonds, and Other Investments. 1. What is the value of the two investments: a. Stock in which you expect a dividend of $300 a year indefinitely. You feel you should obtain a 10% return based on the risk you are taking. Solution: $3,000. b. Painting that you expect to sell for $300,000 in 5 years.

### Here we need to find the coupon rate of the bond. All we need to do is to set up the bond pricing equation and solve for the coupon payment as follows: P = $948 = C(PVIFA5.90%,8) + $1,000(PVIF5.90%,8) Solving for the coupon payment, we get: C = $50.66 The coupon payment is the coupon rate times par value.

27 Nov 2014 Chapter 7 Stock Valuation „ Solution to Problems P7-1. LG 2: Authorized and Available Shares Basic (a) Maximum shares available for sale