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    Lahore School of Economics Financial Management I Bonds and Their Valuation - 1 Assignment 7

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    octavia
    This document provides examples and problems related to bond valuation from Chapter 7 of the textbook "Financial Management I" from Lahore School of Economics. The examples calculate bond prices given information about the bond's par value, coupon rate, time to maturity, and market interest rate. The problems ask the reader to calculate bond prices or yields given some of the same bond characteristics.

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    Lahore School of Economics Financial Management I Bonds and Their Valuation - 1 Assignment 7

    Uploaded by

    octavia
    19 views1 page
    This document provides examples and problems related to bond valuation from Chapter 7 of the textbook "Financial Management I" from Lahore School of Economics. The examples calculate bond prices given information about the bond's par value, coupon rate, time to maturity, and market interest rate. The problems ask the reader to calculate bond prices or yields given some of the same bond characteristics.

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    A7

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    This document provides examples and problems related to bond valuation from Chapter 7 of the textbook "Financial Management I" from Lahore School of Economics. The examples calculate bond prices given information about the bond's par value, coupon rate, time to maturity, and market interest rate. The problems ask the reader to calculate bond prices or yields given some of the same bond characteristics.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    19 views1 page

    Lahore School of Economics Financial Management I Bonds and Their Valuation - 1 Assignment 7

    Uploaded by

    octavia
    This document provides examples and problems related to bond valuation from Chapter 7 of the textbook "Financial Management I" from Lahore School of Economics. The examples calculate bond prices given information about the bond's par value, coupon rate, time to maturity, and market interest rate. The problems ask the reader to calculate bond prices or yields given some of the same bond characteristics.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    Lahore School of Economics

    Financial Management I
    Chapter 7
    Bonds and their Valuation – 1
    Assignment 7

    Examples

    1. A bond that matures in 8 years has a par value of $1,000 and an annual coupon payment of $70; its market
    interest rate is 9%. What is its price? A bond that matures in 12 years has a par value of $1,000 and an annual
    coupon of 10%; the market interest rate is 8%. What is its price? Which of those two bonds is a discount bond, and
    which is a premium bond?

    2. Halley Enterprises’ bonds currently sell for $975. They have a 7-year maturity, an annual coupon of $90, and a
    par value of $1,000. What is their yield to maturity?

    3. A bond has a $1,000 par value, 10 years to maturity, and a 7% annual coupon and sells for $985.
    a) What is its yield to maturity (YTM)?
    b) Assume that the yield to maturity remains constant for the next 3 years. What will the price be 3 years
    from today?

    4. Last year Joan purchased a $1,000 face value corporate bond with an 11% annual coupon rate and a 10-year
    maturity. At the time of the purchase, it had an expected yield to maturity of 9.79%. If Joan sold the bond today for
    $1,060.49, what rate of return would she have earned for the past year?

    5. Hartwell Corporation’s bonds have a 20-year maturity, an 8% semiannual coupon, and a face value of $1,000.
    The going interest rate (rd) is 7% based on semiannual compounding. What is the bond’s price?

    6. If you were told that a 15-year bond with a 10% semiannual coupon was selling for $1,523.26, what would be
    its YTM?

    Problems for Assignment

    1. Callaghan Motors’ bonds have 10 years remaining to maturity. Interest is paid annually, they have a $1,000 par
    value, the coupon interest rate is 8%, and the yield to maturity is 9%. What is the bond’s current market price?

    2. Nungesser Corporation’s outstanding bonds have a $1,000 par value, a 9% annual coupon, 8 years to maturity,
    and an 8.5% YTM. What is the bond’s price?

    3.  A 6-year Circular File bond pays interest of $80 annually and sells for $950.What are its coupon rate and yield
    to maturity?

    4. Heymann Company bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000
    par value and a coupon rate of 9%. What is the yield to maturity at a current market price of (1) $829 and (2)
    $1,104?

    5. Nesmith Corporation’s outstanding bonds have a $1,000 par value, an 8% semiannual coupon, 14 years to
    maturity, and an 11% YTM. What is the bond’s price?

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