Valuation and Characteristics of Bonds
Valuation and Characteristics of Bonds
*Complete the problems in an Excel spreadsheet. Be sure to show your work to receive credit; no hard keys.
| Problem 9.1: Bond Valuation |
| Calculate the value of bond that matures in 10 years and 1,000 SAR par value. The coupon rate is 8% and the market’s required yield to maturity is 12%.
Problem 9.2: Yield to Maturity A bond’s market price is 850 SAR. It has a 1000 par value, will be mature in 8 years, and the coupon rate 8 percent annually. What is the bond’s yield to maturity? What happens to the bond’s yield to maturity if the bond matures in 16 years? What is mature in 5 years?
Problem 9.3: Bond Valuation w/Semiannual Coupon Payment A bond matures in 10 years with 1,000 SAR par value. The coupon rate is 8% and the market’s required yield to maturity is 12%. What would be the value of this bond if it pays the coupon payment semiannually?
Problem 9.4: Bond Valuation w/Zero Coupon Payment A zero coupon bond matures in 10 years with 1,000 SAR par value. The market’s required yield to maturity is 12%. What would be the value of this bond?
Problem 9:5: Bondholder’s Expected Rate of Return A bond matures in 15 years with 1,000 SAR par value. The coupon rate is 9% and the market price is 1250 SAR. What would be the expected rate of this bond?
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