CHAPTER 7 PROBLEMS

VALUATION AND CHARACTERISTICS OF BONDS

PROBLEM 7-1
BOND VALUATION
DATA
Years 20
Face value $1,000.00
Interest 7%
Payment $70.00
ROR 10%
Market price $875
A)
Expected rate of return

B)
Present value =

PROBLEM 7-2
BOND VALUATION

DATA
Years 14
Face value 1,000
Interest 7% 70
ROR 10%

Present Value = 515.67

263.33

PROBLEM 7-3

DATA
Years 10
Face value 1000
Interest 6% 60
ROR 8%

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Today's value $1,060

A)
Present value =

B)
Year 1
ROR in one yr =

PROBLEM 7-4
BOND VALUATION

DATA
Coupon rate 10% 100
Times interest paid semi-annual
Years to Maturity 8
Par Value 1,000
Required rate of return 8%

A) Present value = 582.61

533.91

B) If the interest is annuall = 574.66

540.27

PROBLEM 7-5

DATA
Series A Series B
Interest $85 85
Years 12 1.00
Future value 1000 1000

A) Series A Series B
ROR 5% 5%
Present value

ROR 8% 8%

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Present value

ROR 12% 12%

Present value

PROBLEM 7-6
BONDHOLDER'S EXPECTED RATE OF RETURN

DATA
Market Price 900
Interest Paid Semiannual 8% 40
Years to Maturity 10
Bond 1,000

Expected rate of return =

PROBLEM 7-7
BOND VALUATION

DATA
Market Price 1200
Interest 9% 90
Years to Maturity 5
Future value 1000

Expected rate of return

PROBLEM 7-8
BOND VALUATION

DATA
Years 20
Interest 9% 90
Market price 945
Bond 1,000

Expected rate of return =

PROBLEM 7-9
BONDHOLDER'S EXPECTED RATE OF RETURN

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DATA
Years 12
Interest 7% 70
Market Price 1,150
Bond 1,000

Expected rate of return=

PROBLEM 7-10
BOND VALUATION

DATA
Years 15
Interest 8% 80
Market price 1,085
Bond 1,000
Required rate of return 10%

A)Expected rate of return =

B)
Value = 608.49
239.39

PROBLEM 7-11
BOND VALUATION

DATA
Years 15
Interest 10% 100
Bond 1,000
Required rate of return 12%

A)The value of bond = 681.09

182.70

B)
Required rate of return 15%
The value of bond 584.74

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 122.89

Required rate of return 8%

The value of bond 855.95
315.24

D)
Years 5
Required rate of return 12%
The value of bond 360.48
567.43

Required rate of return 15%

The value of bond 335.22
497.18

Required rate of return 8%

The value of bond 399.27
680.58

PROBLEM 7-12
BOND VALUATION

DATA
Years 20
Interest 8% 80
Bond 1,000
Required rate of return 7%

A) Value of bond= 847.52

258.42

B)
Required rate of return 10%
The value of bond 681.09

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 148.64

Required rate of return 6%

The value of bond 917.59
311.80

D)
Years 10
Required rate of return 7%
The value of bond 561.89
508.35

Required rate of return 10%

The value of bond 491.57
385.54

Required rate of return 6%

The value of bond 588.81
558.39

PROBLEM 7-13
BOND VALUATION-ZERO COUPON

Years 7
Interest 9%
Bond 1,000

The value of bond

PROBLEM 7-14
BOND VALUES

Bond A Periods 6
Interest 10% 100

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 Bond 1,000
Market rate 10%
Market rate 4%
Market rate 16%

a b c
10% Rate 4% Rate 16% Rate
253.78 280.07 231.14
746.22 887.97 630.17

Bond B Periods 14
Interest 10% 100
Bond 1,000
Market rate 10%
Market rate 4%
Market rate 16%

a b c
10% Rate 4% Rate 16% Rate
494.93 605.31 412.21
505.07 757.88 340.46
Value of bond =

Bond C Periods 40
Interest 10% 100
Bond 1,000
Market rate 10%
Market rate 4%
Market rate 16%

a b c
10% Rate 4% Rate 16% Rate
857.95 1,367.77 596.23
142.05 452.89 46.03
Value of bond =

COMPREHENSIVE PROBLEM

Bell

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 South Dole Xerox
Coupon 6.375% 7.875% 7.200%
Years to Maturity 27 12 11
Bond 1,000 1,000 1,000

A) Bell
South Dole Xerox
n= 27 12 11
i= 7% 7.5% 10%
PMT= 63.75 78.75 72.00
FV= 1,000 1,000 1,000
PV=

B) Bell
South Dole Xerox
n= 27 12 11
PV= 945 1,002.50 835
PMT= 63.75 78.75 72.00
FV= 1,000 1,000 1,000
i=

C)
1) Bell
South Dole Xeroc
n= 27 12 11
i= 9% 9.5% 12%
PMT= 63.75 78.75 72.00
FV= 1,000 1,000 1,000
PV=

2) Bell
South Dole Xeroc
n= 27 12 11
i= 5% 5.5% 8%
PMT= 63.75 78.75 72.00
FV= 1,000 1,000 1,000
PV=

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ONDS

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