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# Quantitative Foundation of Financial Management

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1. Bond. What is the value of a \$1,000 par value bond with annual payments of an
a. 11% coupon with a maturity of 20 years and a 15% required return?
b. 12% coupon with a maturity of 10 years and a 7% required return?
c. 8% semiannual coupon with a maturity of 10 years and a 11% required return?
d. 8% semiannual coupon with a maturity of 20 years and a 6% required return?

2. Bond. What is the yield to maturity of a \$1000 par value bond with an
a. 10% semiannual coupon and 20 years to maturity and a \$1,000 price?
b. 6.5% semiannual coupon and 13 years to maturity and a \$890 price?
c. 7.5% annual coupon and 19 years to maturity and a \$788 price?
d. 4.5% annual coupon and 7 years to maturity and a \$800 price?

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Quantitative foundations of financial management is examined.

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Question 1
VALUATION OF A BOND
"1. Bond. What is the value of a \$1,000 par value bond with annual payments of an
a. 11% coupon with a maturity of 20 years and a 15% required return? b. 12% coupon with a maturity of 10 years and a 7% required return?
c. 8% semiannual coupon with a maturity of 10 years and a 11% required return?
d. 8% semiannual coupon with a maturity of 20 years and a 6% required return?
Part a
INPUT PARAMETERS
Parameter Value
F = Face value of bond \$1,000
n = No. of coupon payments per year 1 per year
r = Annual Required rate of return 15%
c = Coupon interest rate 11%
t = Time to maturity 20 years

FUNDAMENTAL CONCEPT
Value of Bond = PV of coupon payments + PV of principal repayment
PV of coupon ...

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