Problems on Valuation of Securities
Valuation of security :
1) The face value of 10 year 10% bond ( with 10 coupon rate interest ) is Rs 1,000 . Assuming 12 % required rate of return of investors , compute the value of the bond. What price would the investor be willing to pay , if the interest is payable annually.
2) Assume i) Rs.100 par value ii)8% coupon rate of interest and iii)10 years remaining to maturity date; If interest rate is paid annually find the value of bond when required rate of return is i)7% ii) 8 % and iii) 9% indicate the nature of selling the bond either at discount/ premium/par
3)The share of a certain stock paid a dividend of Rs.2.00 last year (D0=Rs.2.00) The dividend is expected to grow at a constant rate of 6 percent rate in the future . The required rate of return on this stock is considered to be 12 percent . How much the stock should sell right now ? Assuming that the expected growth rate and required rate of return remain the same at what price should the stock sell 2 years hence?
4) The bonds of the premier company ltd are currently selling for Rs.10,800 Assuming i) coupon rate of interest 10 % ii) par value Rs.10,000 iii) years to maturity 10 years iv) annual payment . Compute the YTM
5) IDBI, in its issue of Flexibonds-3 offered growing interest bond . The interest will be paid to the investors every year at the rates given below and the minimum deposit is Rs.5,000 . Calculate the yield to Maturity (YTM)
| |Interest Per Annum |
|Year 1 |10.5 |
|Year 2 |11.00 |
|Year 3 |12.50 |
|Year 4
1) The face value of 10 year 10% bond ( with 10 coupon rate interest ) is Rs 1,000 . Assuming 12 % required rate of return of investors , compute the value of the bond. What price would the investor be willing to pay , if the interest is payable annually.
2) Assume i) Rs.100 par value ii)8% coupon rate of interest and iii)10 years remaining to maturity date; If interest rate is paid annually find the value of bond when required rate of return is i)7% ii) 8 % and iii) 9% indicate the nature of selling the bond either at discount/ premium/par
3)The share of a certain stock paid a dividend of Rs.2.00 last year (D0=Rs.2.00) The dividend is expected to grow at a constant rate of 6 percent rate in the future . The required rate of return on this stock is considered to be 12 percent . How much the stock should sell right now ? Assuming that the expected growth rate and required rate of return remain the same at what price should the stock sell 2 years hence?
4) The bonds of the premier company ltd are currently selling for Rs.10,800 Assuming i) coupon rate of interest 10 % ii) par value Rs.10,000 iii) years to maturity 10 years iv) annual payment . Compute the YTM
5) IDBI, in its issue of Flexibonds-3 offered growing interest bond . The interest will be paid to the investors every year at the rates given below and the minimum deposit is Rs.5,000 . Calculate the yield to Maturity (YTM)
| |Interest Per Annum |
|Year 1 |10.5 |
|Year 2 |11.00 |
|Year 3 |12.50 |
|Year 4