c


m ? A bond with m
years to maturity pays annual coupon of m
 If the bond is currently
trading Rs mm what is the effective cost? If trading at Rs 887?

2 ? A  year bond with 8 coupon is selling at Rs 92 What is the YTM?

 ? onds selling at Rs m
 m have a maturity of 9 years and the YTM is 7 What is the
coupon rate?

4 ? A m2 year debenture with annual coupon of m
 is traded at Rs 8
The flotation costs
were m
 of par value What is their effective cost if the issuer pays tax at the rate of
? What if the bonds were to be redeemed at a  premium?

 ? Which of the 2 bonds would you invest in if your expected yield is 
-? A bond with 7 years to maturity  coupon paid quarterly Traded at Rs 97
-? A bond with  years to maturity 4  coupon paid bi annually Traded at Rs 9m

 ? A zero coupon bond with  years to maturity is trading at is Rs 747 What is the YTM?

7 ? A zero coupon bond with m
year maturity is traded at Rs 

Half the face value is
redeemed after  years and the balance on maturity What is the YTM?

8 ? Your company is planning to issue 8 year bonds with m
 annual coupon The principal
will be repaid on maturity If investors expect an annual return yield of 8 what is the
fair issue price? Suppose the bond amount will be amortized equally over the 8 years
what will be the fair issue price?

9 ? Your company is planning to issue 9 year debentures with par value of Rs m

The
bonds will be redeemed at  premium on maturity The coupon will be paid as  9 for
 first  years m
 for next  years and mm for remaining period If the issue price is Rs
7 what will be the yield to the investor?

m
? AA¶ rated bonds currently offer yields of 7  while A¶ rated bonds offer yields of
7 8 Your company¶s m
bonds with an annual coupon of 7 are downgraded from
AA¶ to A¶ What is the impact of this on the bond prices?

mm ?Assume the relevant T-ill rate is 9 Corporate bonds have a spread over this
depending on their credit rating 
AAA +
AA + 4
A + 
Your company is rated AA and a bond of Rs m


is selling at Rs m

The bond has 
years to maturity and pays an annual coupon of m What is the effective YTM? Should
an investor buy the bonds?

m2 ?
AL has raised 
crs through an issue of m
year 9 debentures having par value of Rs


each The bonds are redeemable in 4 equal installments starting from end of 7th year
If the debentures were issued for Rs 4

what is the cost to
AL? If
AL¶s tax rate is

 what is the effective cost of debt?

m ?A 9  year bond is issued at Rs 9
and to be redeemed at Rs m
 What is the cost? If
the same cost is to be maintained with redemption at par what should be the issue price?
If the same cost is to be maintained with issue at par what should be the redemption
value?

m4 ?n m
2

 HTC issued Rs m


bonds due on m
2
m The company will not pay
any interest till m
2

8 Half yearly interest is payable from mm22

8; annual rate
of interest is m2 The bonds will be redeemed at  premium on maturity What is the
effective cost if the fair value of the bond is Rs 48?
m ? ive years ago A Ltd sold at par a 2
year debenture with m4 annual coupon rate The
call premium is m
 at  years m2 at m
years and m4 at m years Redemption
premium on maturity is 8 on maturity? Should A call the debentures - when? The tax
rate for A is 4


m ?MC has a m million bond issue with  years to maturity It is considering a refinancing
opportunity Evaluate the decision based on the data 

ld New

Par Value-Rs m





m


Coupon m m

Issued on 8m977 m8m98m
Maturity Date m8m987 m8m987
Redeemed on m8m98m
ond Life - Yrs m

lotation costs-Rs 2







Call premium 
Tax Rate 4


(Hint: Use after tax cost of debt as discounting rate for the analysis