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CARLOS PONTON
1) valuate a bond 1000 euros, 5 years maturity and 2,5% coupon rate today, if the discounted rate is 4%
Bo= 25 + 25 + 25 + 25 + 25 + 1000
(1,04) ^1 (1,04) ^2 (1,04) ^3 (1,04) ^4 (1,04) ^5 (1,04) ^5
Bo= 25 + 25 + 25 + 25 + 25 + 1000
1.04 1.0816 1.1249 1.1699 1.2167 1.2167
Bo= 933.22
2) analyze a bond, $ 100000 par value, 10 years maturity, 2,5% semiannually coupon rate and 4% discounted rate
Bo= 1250 + 1250 + 1250 + 1250 + 1250 + 1250 + 1250 + 1250 + 1250
(1,02) ^1 (1,02) ^2 (1,02) ^3 (1,02) ^4 (1,02) ^5 (1,02) ^6 (1,02) ^7 (1,02) ^8 (1,02) ^9
Bo= 1225.49 + 1201.4609765 + 1177.903 + 1154.8068 + 1132.164 + 1109.964 + 1088.2 + 1066.863 + 1045.944
Bo= 87736.425
1) calculate the YTM of an european Bond, 100000 €, 1% semiannually coupon, 2 years maturity, that has a current market price of 99%
YTM= 1.51%
2) find the YTM of a Mexican Global Bond, 10000 pesos, 2% quarterlly coupon, 2 years maturity, that has a current market price of 102%
10200= 50 + 50 + 50 + 50 + 50 + 50 + 50 + 50 + 10000
(1,00251) ^1 (1,00251) ^2 (1,00251) ^3 (1,00251) ^4 (1,00251) ^5 (1,00251) ^6 (1,00251) ^7 (1,00251) ^8 (1,00251) ^8
10200= 50 + 50 + 50 + 50 + 50 + 50 + 50 + 50 + 10000
1.00251 1.0050263001 1.007549 1.0100779 1.012613 1.015155 1.017703 1.020257 1.020257
10200= 49.8748142 + 49.749941862 + 49.62538 + 49.501134 + 49.3772 49.25357 49.13025 49.00725 9801.449
YTM= 1.004%
3) Valuate an Ecuadorian Global Bond 2012, $1000 , 6% semiannually coupon, 4 years maturity, that has a 35% current market price
350= 30 + 30 + 30 + 30 + 30 + 30 + 30 + 30 + 1000
(1,199) ^1 (1,199) ^2 (1,199) ^3 (1,199) ^4 (1,199) ^5 (1,199) ^6 (1,199) ^7 (1,199) ^8 (1,199) ^8
350= 30 + 30 + 30 + 30 + 30 + 30 + 30 + 30 + 1000
1.199 1.437601 1.723684 2.0666966 2.477969 2.971085 3.562331 4.271235 4.271235
350= 25.0208507 + 20.868099007 + 17.40459 + 14.515919 + 12.10669 10.09732 8.421452 7.02373 234.1243
YTM= 39.80%
Brazilian Bond
YTM= 5.062%
Japanese Bond
99000= 6250 + 6250 + 6250 + 6250 + 6250 + 6250 + 6250 + 6250 + 6250
(1,00251) ^1 (1,00251) ^2 (1,00251) ^3 (1,00251) ^4 (1,00251) ^5 (1,00251) ^6 (1,00251) ^7 (1,00251) ^8 (1,00251) ^9
99000= 6250 + 6250 + 6250 + 6250 + 6250 + 6250 + 6250 + 6250 + 6250
1.0637 1.13145769 1.203532 1.2801965 1.361745 1.448488 1.540757 1.638903 1.743301
99000= 5875.71684 + 5523.8477366 + 5193.05 + 4882.063 + 4589.699 + 4314.844 + 4056.448 + 3813.526 + 3585.152
99000= 99014.0363
YTM= 25.480% 1.0637
European Bond
Bo= 96195.019
USA Bond
Bo= 96145.613
Bond Valuation Homework
CARLOS PONTON
1) calculate the YTM of an european Bond, 100000 €, 1% semiannually coupon, 2 years maturity, that has a current market price of 99%
2) find the YTM of a Mexican Global Bond, 10000 pesos, 2% quarterlly coupon, 2 years maturity, that has a current market price of 102%
3) Valuate an Ecuadorian Global Bond 2012, $1000 , 6% semiannually coupon, 4 years maturity, that has a 35% current market price
Japanese bond
USA Bond
6.3.- Greenman Engineering has some 15-years $1,000 par bonds outstanding, when have coupon interest rate of 9 percent
and pay interest annually. What is the yield to maturity on the bonds if thier current market price is:
a. $1,181.72
b. $795.99
c. Would you be wiling to pay $795.99 if you minimum required rate of return was 11 percent? Why or why not?
a. b.
par/face value: 1000 par/face value: 1000
periods 15 periods 15
coupon 90 coupon 90
Present Value 1181.72 Present Value 795.99
YTM 7.004% YTM 11.994%
c.
yes, because the yield to maturity is higher than required rate of return
6.4.- A $1,000 par value bond has a 12 percent coupon rate, pays interests annually, and has 15 years ramaining until it matures.
a. If Bo = $1,151.72, what is its yield to maturity (YTM)?
b. If the bond can be called in 6 years at $1,030, what is the bond's yield to call (YTC)?
a. b.
par/face value: 1000 call price: 1030
periods 15 periods 6
coupon 120 coupon 120
Present Value 1151.72 Present Value 1151.72
YTM 10.005% YTC 9.015%
6.6.- Kamath Brothers has a $1,000 par, 9 percent coupon rate bond oustanding. The bond has 14 years to maturity.
a. If the current market value of the bond is $1,200, and interest is paid annually, what is the bond's yield to maturity?
b. What if everthing is as in (a), but interest is paid semiannually?
a. b.
par/face value: 1000 par/face value: 1000
periods 14 periods 28
coupon 90 coupon 45
Present Value 1200 Present Value 1200
YTM 6.748% YTM 3.384% x 2 = 6.767%
Homework
Carlos Ponton.
1.- In the New York Stock exchange there is the following Bonds information
Petrobras
YTM YTC
Vodafone
YTM YTC
Toyota
YTM YTC
Year 1 2 3 4 5
10,000.00 10,000.00 20,000.00 30,000.00 30,000.00
Valuate the Bond if financial markets expects a minimum rate of return of 12%
Year 1 2 3 4 5
10,000.00 10,000.00 20,000.00 30,000.00 30,000.00
coupon 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00
total payments 20,000.00 20,000.00 30,000.00 40,000.00 40,000.00
discount factor 1.12 1.2544 1.404928 1.57351936 1.7623417
Manual Calulation:
Bo= 17857.1429 15943.88 21353.41 25420.72 22697.074
Bo= $ 103,272.23
3.- Ford Co. Is analyzing to issue a Zero Coupon Corporate Bond, 100,000 dollars, 5 years,
and the financial market is willing to pay no less than 92% current market price. How much
is the profitability of the negotiation.