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a. Create a spreadsheet similar to the Excel spreadsheet examples located in the chapter to
solve for the yield to maturity.
b. Create a spreadsheet similar to the Excel spreadsheet examples located in the chapter to
solve for the price of the bond if the yield to maturity is 2% higher.
c. Create a spreadsheet similar to the Excel spreadsheet examples located in the chapter to
solve for the price of the bond if the yield to maturity is 2% lower.
d. What can you summarize about the relationship between the price of the bond, the par
value, the yield to maturity, and the coupon rate?
Answer:
b)
Price of the bond if YTM is PV = PV (6%, N, PMT,
($616.11)
2% higher = 6% FV,0)
C)
Price of the bond if PV = PV (2%, N, PMT,
($1,303.53)
YTM is 2% lower = 2% FV,0)
d)
As we can see previously from a to c:
- The bond price same as its par value when YTM = The Coupon Rate.
- The relation of:
o Coupon Rate
o The Price of the Coupon
o The par value
Represented finally by the YTM.
Chapter (6):
Interest Rate and Bond Valuation
P6 - 23:
Bond valuation and yield to maturity Mark Goldsmith’s broker has shown him two bonds.
Each has a maturity of 5 years, a par value of $1,000, and a yield to maturity of 12%. Bond A
has a coupon interest rate of 6% paid annually. Bond B has a coupon interest rate of 14%
paid annually.
Answer:
Bond A Bond B
Maturity (Years) N 5 5
Face Value FV $ 1,000 $ 1,000
Yield to Maturity YTM 12% 12%
Coupon Interest Annually pmt% 6% 14%
d)
Years Bond A INCOME Reinvestment Income 10%
1 60 0 0
2 60 126 66
3 60 198.6 138.6
4 60 278.46 218.46
5 1060 1366.306 306.306
Years Bond B INCOME Reinvestment Income 10%
1 140 0 0
2 140 294 154
3 140 463.4 323.4
4 140 649.74 509.74
5 1140 1854.714 714.714
e)
Reference to d analysis, will be Bond B the best chooses for Mark.
Chapter (8):
Risk and Return Fundamentals
The Requirements:
Compare between 3 companies Stocks by analysis the last 10 years:
- Telecom Egypt - ETEL
- Heliopolis Company for Housing and Development- HELI
Upper Egypt Flour Mills- UEFM
The Study Notes:
1- Use Mubasher Masr to collect stocks prices
2- According to differentiation in the Financial years for each company, where ETEL
start from Jan. to December and HELI from July to June. I toke the prices according to
the financial year for each company.
The Study:
Telecom Egypt - ETEL
Year (AR-
Pt+1 Pt Dividends AR Prob. (ARxProb.) (AR-ER)^2)x Prob.
ER)^2
2009 18.100 16.200 1.300 19.8% 0.100 0.020 0.012 0.001174147
2010 18.080 18.170 1.300 6.7% 0.050 0.003 0.001 2.54917E-05
2011 13.210 18.000 1.400 -18.8% 0.050 -0.009 0.077 0.003850483
2012 14.150 13.270 1.300 16.4% 0.100 0.016 0.006 0.000564114
2013 14.680 14.150 1.050 11.2% 0.150 0.017 0.001 7.58564E-05
2014 11.920 14.680 0.200 -17.4% 0.050 -0.009 0.069 0.003473186
2015 6.420 11.920 0.750 -39.8% 0.100 -0.040 0.238 0.023781494
2016 11.750 6.420 1.000 98.6% 0.150 0.148 0.804 0.120639826
2017 13.420 11.750 0.250 16.3% 0.100 0.016 0.006 0.000551031
2018 12.680 13.420 0.250 -3.7% 0.150 -0.005 0.016 0.002369525
ER (Average) 8.9%
ER(Weighted
Average) 15.7%
Sigma 12% 40%
CV (Simple
1.38
Average)
CV (Weighted Average) 2.52
RRR (Simple Average) 21%
RRR (Weighted Average) 55%
Heliopolis Company for Housing and Development- HELI
Year
Pt+1 Pt Dividends AR Prob. (ARxProb.) (AR-ER)^2 (AR-ER)^2)x Prob.
2008-2009 6.140 15.830 1.000 -54.9% 0.100 -0.055 0.813 0.081305516
2009-2010 4.290 6.220 1.500 -6.9% 0.050 -0.003 0.178 0.008898709
2010-2011 4.720 4.220 0.900 33.2% 0.050 0.017 0.000 2.20174E-05
2011-2012 3.890 4.810 0.750 -3.5% 0.100 -0.004 0.151 0.015060692
2012-2013 5.410 3.890 0.850 60.9% 0.150 0.091 0.066 0.009870104
2013-2014 10.170 5.410 1.000 106.5% 0.050 0.053 0.507 0.025344137
2014-2015 14.430 10.170 1.250 54.2% 0.100 0.054 0.036 0.003574048
2015-2016 11.280 14.430 2.700 -3.1% 0.150 -0.005 0.147 0.022109538
2016-2017 29.040 11.280 0.600 162.8% 0.100 0.163 1.625 0.162542493
2017-2018 29.610 29.040 0.500 3.7% 0.150 0.006 0.100 0.014968192
ER (Average) 35.3%
ER(Weighted
31.7%
Average)
Sigma 21% 59%
CV (Simple Average) 0.60
CV (Weighted Average) 1.85
RRR (Simple Average) 56%
RRR (Weighted Average) 90%