Question

In: Finance

-Find an example of a company that has issued a bond -Why did the company issue...

-Find an example of a company that has issued a bond

-Why did the company issue the bond?

-What is the price of the bond today?

-Why do believe the bond value has changed?

Expert Solution

-Find an example of a company that has issued a bond

Company name = Reliance Industries Limited

Face value or At Par value = INR 1000

Number of bonds = 25000

Coupon = 6.95% or INR 69.5

Market price = INR 991

Maturity = 3 years

Yield = 7.3%

Rating of Bond = AAA

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-Why did the company issue the bond?

Company issued bond to finance its projects. 3 years issuance will give stability and ensure liquidity.

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-What is the price of the bond today?

Price of per bond is INR 991

Can be calculated: =PV(7.3%,3,-69.5,-1000)

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-Why do believe the bond value has changed?

Bond value changed due to change in the yield of the bond. The present interest rate increased from 6.95% to 7.3% resulting higher discounting factor.

Hence, bond price decreased from INR 1000 to INR 991.

The bond price decreases as yield on bond increases. The discounting factor increases in form of yield.

jeff jeffy answered 1 year ago

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