Mr. Antony inherited the following securities on his uncle’s death: Types of security No of securities...

Mr. Antony inherited the following securities on his uncle’s death:

Types of security	No of securities	Annual coupon %	Maturity years	Yield %
Bond A (Rs 1,000)	10	12	4	14
Bond B (Rs 1,000)	10	8	7	11
Preference shares C (Rs 100)	100	12	-	14
Preference shares D (Rs 100)	100	13	-	15

Compute the current value of his uncle’s portfolio.

Expert Solution

Period	Discounting Factor [1/(1.14^period)]	Discounting Factor Annuity (Sum of discounting factor & all previous discounting factors)	Discounting Factor [1/(1.11^period)]	Discounting Factor Annuity (Sum of discounting factor & all previous discounting factors)
1	0.877192982	0.877192982	0.900900901	0.900900901
2	0.769467528	1.646660511	0.811622433	1.712523334
3	0.674971516	2.321632027	0.731191381	2.443714715
4	0.592080277	2.913712304	0.658730974	3.10244569
5	0.519368664	3.433080969	0.593451328	3.695897018
6	0.455586548	3.888667517	0.534640836	4.230537854
7	0.399637323	4.288304839	0.481658411	4.712196265

						Value per Security	Total Value [Value per Security*No of Securities]
Type	Par Value	No of Securities	Annual Coupon	Maturity	Yield	Formula	Calculation	Value
Bond A	1000	10	0.12	4	0.14	[Maturity ValueDiscounting Factor]+ [CouponPV Annuity Factor]	[10000.5921]+[(10000.12*2.9137]	941.744	9417.44
Bond B	1000	10	0.08	7	0.11	[Maturity ValueDiscounting Factor]+ [Coupon AmountPV Annuity Factor]	[10000.4817]+[(10000.08*4.7122]	858.676	8586.76
Pref shares C	100	100	0.12	-	0.14	Coupon Amount/Yield	(100*0.12)/0.14	85.71429	8571.428571
Pref share D	100	100	0.13	-	0.15	Coupon Amount/Yield	(100*0.13)/0.15	86.66667	8666.666667
							Value of Portfolio	35242.29524

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