Suppose that a corporation issues a bond having face value ₹ 1,000 redeemable at premium of 10% at the end of 3 years. If the discount rate is 12% and coupon rate is 8%, then calculate the value of this bond. Moreover, would you buy this bond if the market price of the bond is ₹ 1,050 or ₹ 800? Calculate the yield to maturity from the following information. Coupon rate = 7%, face value = ₹ 500, price of bond = ₹ 350, maturity period = 10 years.
Part A: Valuation of Bond Given: Face Value (FV) = ₹1,000 Coupon Rate = 8% → Annual Coupon = 8% of ₹1,000 = ₹80 Redemption Value = ₹1,000 + 10% premium = ₹1,100 Time to maturity = 3 years Discount Rate (r) = 12% Formula for Present Value of Bond: Bond Value = Present Value […]