O'Reilly logo

Fundamentals of Financial Management, Third Edition by Vyuptakesh Sharan

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

SOLVED NUMERICAL PROBLEMS
  1. A company issues a 3-year zero-coupon bond with a face value of Rs 1,00,000. It is assumed that interest accrues twice a year. The investors wish to have a 5% return on investment. Find the issue value of the bond.

    Solution

    Effective interest rate = {1 + (0.05/2)2} − 1 = 0.050625 = 5.0625%

    Issue value = Rs 1,00,000 / (1+ 0.050625)3 = Rs 86,229.19

     

  2. If a zero-coupon bond with a 5-year maturity is issued at Rs 13,611.66 and the investors’ required rate of return is 8%, find the face value of the bond.

    Solution

    Rs 13,611.66 (1.08)5 = Rs 20,000

     

  3. A company issues a 5% Rs 1,00,000 bond with a 3-year maturity. The investors’ required rate of return is 8%. Find the investors’ intrinsic value of the bond if: (a) interest is ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required