Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 729 views

    Lecture 10 Cma

    Uploaded by

    Umair Hayat
    1) The document summarizes the discounted cash flow analysis of a 5-year bond with a face value of $100 and annual coupon payments of 5%. It shows the cash flows, discount factors, and discounted amounts for each year. 2) It also provides an example of calculating the yield to maturity for a bond paying semiannual interest over 3 years with a face value of $1,000. 3) Additional examples are given for calculating current yield, yield to maturity, yield to call, and determining if a bond is priced at a premium, discount, or par based on its required rate of return.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    Lecture 10 Cma

    Uploaded by

    Umair Hayat
    729 views8 pages
    1) The document summarizes the discounted cash flow analysis of a 5-year bond with a face value of $100 and annual coupon payments of 5%. It shows the cash flows, discount factors, and discounted amounts for each year. 2) It also provides an example of calculating the yield to maturity for a bond paying semiannual interest over 3 years with a face value of $1,000. 3) Additional examples are given for calculating current yield, yield to maturity, yield to call, and determining if a bond is priced at a premium, discount, or par based on its required rate of return.

    Original Description:

    bussiness finance

    Original Title

    Lecture 10 cma

    Copyright

    © © All Rights Reserved

    Available Formats

    XLSX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1) The document summarizes the discounted cash flow analysis of a 5-year bond with a face value of $100 and annual coupon payments of 5%. It shows the cash flows, discount factors, and discounted amounts for each year. 2) It also provides an example of calculating the yield to maturity for a bond paying semiannual interest over 3 years with a face value of $1,000. 3) Additional examples are given for calculating current yield, yield to maturity, yield to call, and determining if a bond is priced at a premium, discount, or par based on its required rate of return.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    729 views8 pages

    Lecture 10 Cma

    Uploaded by

    Umair Hayat
    1) The document summarizes the discounted cash flow analysis of a 5-year bond with a face value of $100 and annual coupon payments of 5%. It shows the cash flows, discount factors, and discounted amounts for each year. 2) It also provides an example of calculating the yield to maturity for a bond paying semiannual interest over 3 years with a face value of $1,000. 3) Additional examples are given for calculating current yield, yield to maturity, yield to call, and determining if a bond is priced at a premium, discount, or par based on its required rate of return.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 8

    Year Cashflows discount factor discounted amount

    1 115 1.075 106.976744186047


    2 115 1.155625 99.5132504056247
    3 115 1.242296875 92.5704654936044
    4 115 1.335469140625 86.1120609242831
    5 115 1.435629326172 80.1042427202634
    5 1000 1.435629326172 696.558632350116
    Price 1161.83539607994

    0.303136
    115 4.041812

    Face Value 100 cashflow discount fa


    coupon rate 5% 1 5 1.024
    years to maturity 5 years 2 5 1.048576
    YTM or r 2.40% 3 5 1.073742
    Coupon amount 5 4 5 1.099512
    5 105 1.1259
    Price

    Face Value 1000 n cashflows


    coupon rate 11.25% 1 56.25
    semiannua return 0.085% 2 56.25
    Year to maturity 3 years 3 56.25
    Coupon amount 56.25 4 56.25
    no of periods 6 5 56.25
    6 1056.25

    Elliot Enterprises’ bonds currently sell for $1,150, have an 11% coupon intere
    a $1,000 par value, pay interest annually, and have 18 years to maturity.
    a. Calculate the bonds’ current yield.
    b. Calculate the bonds’ yield to maturity (YTM).

    a Current yield annual interest/price


    0.095652173913 or 9.56%

    b Yield to maturity

    Coupon
    FV
    MV
    n

    110 -8.33333333333333 0.094574 or 9.46%


    1075
    current yield = interest amount/price 0.066667

    2.857143
    125

    Coupon 80
    face value 1000
    market price 1191.2
    n 30

    73.62666666667
    1095.6
    YTM 0.067202141901 or 6.7%

    Coupon 80
    Call price 1080
    year to call 3
    Market price 1191.2

    42.93333333333
    1135.6
    YTC 0.037806739462 or 3.78%

    year Cashflows Dicount factor Dicounted values


    1 80 1.1 72.7272727272727
    2 80 1.21 66.1157024793388
    3 80 1.331 60.1051840721262
    4 80 1.4641 54.6410764292056
    5 80 1.61051 49.6737058447324
    6 80 1.771561 45.1579144043022
    7 80 1.9487171 41.0526494584565
    8 80 2.14358881 37.3205904167786 a1
    9 80 2.357947691 33.9278094697988 a2
    10 80 2.5937424601 30.8434631543625 a3
    11 80 2.85311670611 28.0395119585114
    12 1080 3.138428376721 344.121283127185
    Price 863.726163542071
    cf/1+r^n

    0.696864111498258
    464.808362369338
    696.558632350116
    1161.36699471945

    discounted amount
    4.8828125
    4.76837158203125
    4.65661287307739
    4.54747350886464
    93.2587340685131
    112.114004532486

    discount factor discounted amount


    1.00085 56.20223
    1.0017007225 56.1545
    1.00255216811413 56.10681
    1.00340433745702 56.05916
    1.00425723114386 56.01155
    1.00511084979033 1050.879
    Bond Value or Price 1331.413

    ave an 11% coupon interest rate and


    18 years to maturity.

    annual interest 110


    Price 1150

    110
    1000
    1150
    18
    6.66%

    0.022857142857143 2.29%
    Par-value 1000
    coupon amount 80
    n 12
    r (1) 0.07
    r (2) 0.08
    r (3) 0.1
    discount rate 0.1

    price of bond @ r = 7% 1079 Premium


    price of bond @ r = 8% 1000 at par
    price of bond @ r = 10% 863.72 Discount

    required rate = coupon rate sold at par


    required rate > coupon rate discount
    required rate < coupon rate Premium

    You might also like