Question

Bond Valuation   
1. General Tube Bhd issued bonds bear a coupon of 6% semi-annually that will be matured in eleven years from now. This bond have a face value of RM1,000.00. Meanwhile, the market value of the bonds is RM989.00. Calculate the yield to maturity (YTM) of the bond.   
2. Sapura Kerinchi issued bonds bear a coupon of 7.5% semi-annually that will be matured in six years from now. This bond have a face value of RM1,000.00. Meanwhile, the yield to maturity (YTM) is 7.68%. Calculate the market price of the bond.   
3. Modenas Motor issued bonds bear a coupon of 6.75% semi-annually that will be matured in six years from now. This bond have a face value of RM1,000.00. Meanwhile, the yield to maturity (YTM) is 6.69%. Calculate the market price of the bond.
4. Rosemary bonds have a face value of RM1,000 and are currently quoted at 98.4. The bonds have a 5% coupon rate. Calculate the current yield on these bonds.   
5. Levis Holding Bhd have a bond paid a coupon annually. The maturity of this bond is 14 years. Meanwhile, the market price of the bond is RM1,382.01. Calculate the coupon rate?

Answer 1

Answer to Question 1:

Face Value = RM1,000.00
Current Price = RM989.00

Annual Coupon Rate = 6.00%
Semiannual Coupon Rate = 3.00%
Semiannual Coupon = 3.00% * RM1,000.00
Semiannual Coupon = RM30.00

Time to Maturity = 11 years
Semiannual Period = 22

Let Semiannual YTM be i%

RM989.00 = RM30.00 * PVIFA(i%, 22) + RM1,000.00 * PVIF(i%, 22)

Using financial calculator:
N = 22
PV = -989
PMT = 30
FV = 1000

I = 3.07%

Semiannual YTM = 3.07%
Annual YTM = 2 * 3.07%
Annual YTM = 6.14%

Answer to Question 2:

Face Value = RM1,000.00

Annual Coupon Rate = 7.50%
Semiannual Coupon Rate = 3.75%
Semiannual Coupon = 3.75% * RM1,000.00
Semiannual Coupon = RM37.50

Time to Maturity = 6 years
Semiannual Period = 12

Annual YTM = 7.68%
Semiannual YTM = 3.84%

Market Price = RM37.50 * PVIFA(3.84%, 12) + RM1,000.00 * PVIF(3.84%, 12)
Market Price = RM37.50 * (1 - (1/1.0384)^12) / 0.0384 + RM1,000.00 * (1/1.0384)^12
Market Price = RM37.50 * 9.472807 + RM1,000.00 * 0.636244
Market Price = RM991.47