chapters_7-8 - Bond Values Valuing a Discount Bond with...

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Bond Values Valuing a Discount Bond with Annual Coupons Face Value $1,000.00 Years to Maturity 5 Coupon Rate 0.1 Discount rate 0.11 Coupons per year 1 PV of face value 593.45 =B3/(1+B6/B7)^(B4*B7) PV of coupon payments 369.59 =(B3*B5/B6)*(1-(1+B6/B7)^(-B4*B7)) Bond Value 963.04 =B8+B9 Settlement Maturity Excel Price 963.04 =(B3/100)*P 1/1/2007 1/1/2012 Valuing a Premium Bond with Annual Coupons Face Value $1,000.00 Years to Maturity 20 Coupon Rate 0.1 Discount rate 0.08 Coupons per year 1 PV of face value 214.55 =B15/(1+B18/B19)^(B16*B19) PV of coupon payments 981.81 =(B15*B17/B18)*(1-(1+B18/B19)^(-B16*B19)) Bond Value 1196.36 =B20+B21 Settlement Maturity Excel Price 1196.36 =(B15/100) 1/1/2007 1/1/2027 Example 7.1 Face Value $1,000.00 Years to Maturity 7 Coupon Rate 0.14 Discount rate 0.16 Coupons per year 2 PV of face value 340.46 =B27/(1+B30/B31)^(B28*B31) PV of coupon payments 577.1 =(B27*B29/B30)*(1-(1+B30/B31)^(-B28*B31)) Bond Value 917.56 =B32+B33 Settlement Maturity Excel Price 917.56 =(B27/100) 1/1/2007 1/1/2014
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YTM with Annual Coupons Using Goal Seek find the discount rate the bond value to the given price Face Value $1,000.00 928.09 Given Price Years to Maturity 15 $0.00 =I3-H10 Coupon Rate 0.1 Set I4 to 0 by changing H6 Discount rate 0.11 Coupons per year 1 PV of face value 209 =H3/(1+H6/H7)^(H4*H7) PV of coupon payments 719.09 =(I3*I5/I6)*(1-(1+I6/I7)^(-I4*I7)) Bond Value 928.09 =I8+I9 Settlement Maturity Excel Yield 0.11 =YIELD(J1 1/1/2007 1/1/2022 YTM with Semiannual Coupons Using Goal Seek find the discount rate the bond value to the given price Face Value $1,000.00 1197.93 Given Price Years to Maturity 20 ($0.00) =I15-H22 Coupon Rate 0.1 Set I16 to 0 by changing H18 Discount rate 0.08 Coupons per year 2 PV of face value 208.29 =I15/(1+I18/I19)^(I16*I19) PV of coupon payments 989.64 =(I15*I17/I18)*(1-(1+I18/I19)^(-I16*I19)) Bond Value 1197.93 =I20+I21 Settlement Maturity Excel Yield 0.08 =YIELD(J2 1/1/2007 1/1/2027 Current Yield 0.08 =H15*H17/H22 Price of the above bond a year later Face Value $1,000.00 Years to Maturity 19 Coupon Rate 0.1 Discount rate 0.08 Coupons per year 2 PV of face value 225.29 =I27/(1+I30/I31)^(I28*I31) PV of coupon payments 968.39 =(I27*I29/I30)*(1-(1+I30/I31)^(-I28*I31)) Bond Value 1193.68 =I32+I33 Capital Gains Yield 0 This would be closer to the difference between YTM
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and the Current Yield had we calculated it over a six-months period
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Two growth rates when the last dividend is known (Example 8.4) Discount rate 0.2 The dividend that has just been paid $5.00 $6.50 =B3*(1+B5) Initial growth rate 0.3 Number of periods with initial growth rate following the first dividend 2 Note that although the Following indefinite growth rate 0.1 PV of dividends under initial growth rate except for the last dividend 11.28 =(B4/(B2-B5))*(1-((1+B Last dividend under initial growth 10.99 =B4*(1+B5)^(B6) PV of the last dividend under initial growth following indefinite growth 76.28 =(B9/(B2-B7))/((1+B2) Value of the stock 87.57
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This note was uploaded on 02/08/2011 for the course BUSINESS S 29:630:301 taught by Professor Briangreczyn during the Spring '10 term at Rutgers.

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chapters_7-8 - Bond Values Valuing a Discount Bond with...

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