I discussed after class some ideas as to how to go about building the Bond Price function. This is problem 4 of the first homework assignment. There are three functions that have to be built. This is stated in the problem. The three functions are a function to calculate the present value interest factor for a single value. The second function returns a calculation of the present value interest factor of an annuity. The third function utilizes the first two functions in calculating the fair value of a bond, and returns the fair value or the theoretical price of the bond given a required rate of return. The first step would be to name the three functions. We can go ahead and create “empty” or “shell” functions. Let’s assume we have decided to name the three functions: 1) BondFairValue() 2) PVIF() 3) PVIFA() So in our module, we make three shell functions. We know that each of the functions will have to return a value that includes decimals so we set to type “Single” the values the functions return. ‘ 1st Function Declaration Function BondFairValue() As Single BondFairValue = 0

End Function ‘ 2nd Function Declaration Function PVIF() As Single PVIF = 0

End Function ‘ 3rd Function Declaration Function PVIFA() As Single PVIFA = 0

End Function ‘ *********************************************************** Notice I have created these functions with a return value. Each function returns the value zero. It is a test value. This way if you were using them in a more complex environment you could add them to your

code and insure the functions were being called or “executed” correctly. Eventually you need to replace the zeros with actual calculations. Also the order that you create the functions, i.e. which one is created first does not matter. Next, think about what are the required parameters. We know that PVIF, and PVIFA both have two ...

...BOND PROBLEM SOLUTIONS
1. Six years ago, The Corzine Company sold a 20-year bond issue with a 14 percent annual coupon rate and a 9 percent call premium. Today, Corzine called the bonds. The bonds originally were sold at their face value of $1,000. Compute the realized rate of return for investors who purchased the bonds when they were issued and who surrender them today in exchange for the call price.
PV = 1000; N = 6; PMT = 140; FV = 1090; CPT I/Y
I/Y = 15.02%
2. You just purchased a bond which matures in 5 years. The bond has a face value of $1,000, and has an 8 percent annual coupon. The bond has a current yield of 8.21 percent. What is the bond’s yield to maturity?
CURRENT YIELD = ANNUAL COUPON ( PV
0.0821 = 80 ( PV
PV = 80 ( 0.0821 = 974.42
N = 5; PMT = 80; FV=1000; PV = 974.42 CPT I/Y
I/Y = 8.65%
3. The Dass Company’s bonds have 4 years remaining to maturity. Interest is paid annually; the bonds have a $1,000 par value; and the coupon interest rate is 9 percent. What is the yield to maturity at a current market price of $829? Would you pay $829 for one of these bonds if you thought that the appropriate rate of return was 12 percent?
PV = 829; N = 4; FV = 1000; PMT =90; CPT I/Y
I/Y = 14.99%
YES, IF YOU THOUGHT THE APPROPRIATE RATE WAS 12%, YOUR PV WOULD...

...perpetual bond is currently selling for RS. 95/-. The coupon rate of interest is 13.5%. The approximate discount rate is 15%. The value of the bond and the YTM is:
(a) Rs. 90/- and 14.2% Value is (13.5*15%=90) and YTM is ((13.5/95)*100=14.21%)
(b) Rs. 100/- and 13.5%
(c) Rs. 90 and 15%
(d) Rs. 90/- and 13.5%
902. In 2001, Meridian Ltd. has issued bonds of Rs. 10,000/-each due in 2011 with a 14% per annum coupon rate payable at the end of each year during the life of the bond. If the required rate of interest is 8%, find the present value of the bond. Tick the nearest option.
(a) 10,000
(b) 7302
(c) 2,700
(d) 14,026 (9394.11+4631.93=14026.05)
903. The present market value of an equity share is Rs. 80/-; and the exercisable price of the warrant is Rs. 60/- per share. An investor is holding a warrant entitling him to purchase 50 equity shares. The minimum value of the warrant is:
(a) 1,000/- (80-60=20*50=1000)
(b) 4,000/-
(c) 3,000/-
(d) None of these
904. A bond with a coupon rate of 8% is available at its face value of Rs. 1,000/-. The market rate of return on an instrument with similar risk goes down to 6%. The bond price will become:
(a) 1,000/-
(b) 750/-
(c) 1,333/- (800/6%)
(d) None of these
905. A bond with a coupon rate of 10% is available at Rs. 1,250/-. The face value of the bond is Rs. 1,000/-. The...

...ASSIGNMENT
UDBS
Consider a 10 year bond that has a face value shs 1000, a coupon rate of 6% and pays interest once a year.
(a)Suppose person A bought this bond at par when it was initially issued and sold it 1 year later to person B for shs 1024.What is B’s total return?
Soln
Total return =[ Interest paid +(selling price – buying price)]/buying price
Given; Annual interest paid = coupon rate x par value, coupon rate = 6%, par value =1000.
= 6% x1000
=60 , buying price = 1000, selling price = 1030
,
= [60 + (1030 – 1000 )]/1000
=0.09 or 9%
(b)Suppose B holds the bond for 1 year and sells it to person C for shs 1024.What is B’s total return?
Soln
Given; annual interest paid = 60, buying price = 1030, selling price = 1024
=[60 + (1024 – 1030)]/1030
=0.052 or 5.2%
(c)Assume C holds the bond for 3years.Suppose that at the end of these 3 years market interest rate for bonds similar to this one is 7%
i)What price should C expect to fetch in the market?
VB =INT(1 -1/(1 + rd)n /rd ) + m/(1 +rd )n
Given; INT = 60, rd =7%, n = 5, M = 1000.
= 60(4.1) + 713
=246 + 713...

...run,
all inputs are variable
3.1 The Production Function
Production function is a tool of analysis used in explaining the input-output relationship.
It describes the technical relationship between inputs and output in physical terms. In its
general form, it holds that production of a given commodity depends on certain specific
inputs. In its specific form, it presents the quantitative relationships between inputs and
outputs. A productionfunction may take the form of a schedule, a graph line or a curve,
an algebraic equation or a mathematical model. The production function represents the
technology of a firm.
An empirical production function is generally so complex to include a wide range of
inputs: land, labour, capital, raw materials, time, and technology. These variables form
the independent variables in a firm’s actual production function. A firm’s long-run
production function is of the form:
Q = f(Ld, L, K, M, T, t) (3.1.1)
where Ld = land and building; L = labour; K = capital; M = materials; T = technology;
and, t = time.
For sake of convenience, economists have reduced the number of variables used in a
production function to only two: capital (K) and labour (L). Therefore, in the analysis of
input-output relations, the production function is expressed as:
Q = f(K, L) (3.1.2)
Equation (3.1.2) represents the algebraic or...

...Life-time examples:
1. In the Deliotte report, it is said 44% of respondents list business intelligence systems as enablers or disruptors that may threaten their business model, which makes it second most concerning technology threat.
2. One example of how business intelligence systems have been maximised is at women’s underwear manufacturer Maidenform. Their CIO Bob Russo said recently after implementing BI, “Providing targeted information at the right place and time is central to improving the decision-making process.
3. Bravissimo is another underwear manufacturer who benefited from using business intelligence systems. They reportly linked their BI tool to the MET office to predict changes in weather.
4. ANZ, proudly tooted their horn in the past when it comes to business intelligence systems. “The analysts are no longer spending all their time building better reports. They are actually doing business analysis that is improving processes and making a real difference.”
5. Just Eat CIO Carlos Morgado also talked about how he implemented a cloud strategy for the online food takeaway business. “We wanted to use off-the-shelf toolsets and not to waste time building what you can buy.”
6. Plantronics and Connotate are another two companies who have used business intelligence systems to their benefit.
Plantronics used dashboards to give a better and graphical view of their opportunity pipeline and help managers by suggesting better allocations of sales resources....

...Bonds and Their Valuation
After reading this chapter, students should be able to:
• List the four main classifications of bonds and differentiate among them.
• Identify the key characteristics common to all bonds.
• Calculate the value of a bond with annual or semiannual interest payments.
• Explain why the market value of an outstanding fixed-rate bond will fall when interest rates rise on new bonds of equal risk, or vice versa.
• Calculate the current yield, the yield to maturity, and/or the yield to call on a bond.
• Differentiate between interest rate risk, reinvestment rate risk, and default risk.
• List major types of corporate bonds and distinguish among them.
• Explain the importance of bond ratings and list some of the criteria used to rate bonds.
• Differentiate among the following terms: Insolvent, liquidation, and reorganization.
• Read and understand the information provided on the bond market page of your newspaper
Characteristics of Bonds
A bond is a long-term contract under which a borrower (the issuer) agrees to make payments of interest and principal, on specific dates, to the holders (creditors) of the bond.
Bearer bond - Bonds that are not...

...and Answers
Using present value to value bonds
A bond, from the perspective of the person issuing the bond is a form of long term debt.
In the hands of the person who has acquired the bond it is an asset.
The agency issuing the bond agrees to pay a fixed sum of money to the holder of the bond for a period of years and then, at the end of that period, to pay back the face value of thebond.
Bonds can be issued by a variety of agencies/companies:
1. Municipal bonds: issued by cities, states and other local agencies
2. Government bonds: issued by the department of finance/treasury department of a government
3. Corporate bonds: issued by companies
Our main interest in relation to bonds is in corporate bonds. Why do companies issue bonds?
• Raise finance
• Often cheaper than bank borrowings
Terminology relevant to bond valuation
• Nominal/Face value/Principal – This is the amount on which interest payments are based. It is normally a round sum such as €1,000.
• Redemption value – This is the amount that will be paid out by the issuer of the bond when he comes to repay/redeem it.
• Coupon – The amount of interest paid on the bond is referred to as the coupon and the rate (%) is the coupon...

...Introduction of bonds……………………………………………..01
Characteristics of Bonds…………………………………………01
Types of Bonds…………………………………………………… 06
Bonds Market……………………………………………………… 08
Introduction of Pakistan bond market……………...................08
How Bonds Trade……………………………………………….….09
Bond Price Variations……………………………………………..09
Bond valuation…………………………………………..................09
Types ofbonds trade in Pakistan……………………………….10
Government Debt Securities……………………………………..10
Characteristics of MTBs and PIBs………………………………12
Pakistan Investment Bonds……………………………………... 12
Auction Mechanism………………………………………………...13
Corporate Bond Market…………………………………………....13
Conclusion…………………………………………………………...14 Reference………………………………… ……………….………...14
Summary of Articles………………………………………………..15
Introduction of bonds
Definition:
A bond is basically a loan. The owner of a bond has given the issuer-whether it is a corporation, a government or another agency-a sum of money that can be used at any point. In exchange, the issuer will pay interest to the bondholder over a period of time and will eventually return the initial amount loaned, called the principal. Unlike a stock, the bondholder does not own a part of the company. Because a bond is basically a loan, they are often called "debt securities"...

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