INVESTMENT ANALYSIS

VELU A/L KUMARASAMY

KJC1010206

ASSINGMENT 3

QUESTION 1

BOND A

Life CF DF at Yield Rate 0.5% PV Life * PV

1 0.25 0.995 0.249 0.249
2 0.25 0.990 0.248 0.495
3 0.25 0.985 0.246 0.739
4 0.25 0.980 0.245 0.980
5 0.25 0.975 0.244 1.219
6 0.25 0.971 0.243 1.456
7 0.25 0.966 0.241 1.690
8 0.25 0.961 0.240 1.922
9 0.25 0.956 0.239 2.151
10 0.25 0.951 0.238 2.378
11 0.25 0.947 0.237 2.603
12 0.25 0.942 0.235 2.826
13 0.25 0.937 0.234 3.046
14 0.25 0.933 0.233 3.264
15 0.25 0.928 0.232 3.480
16 0.25 0.923 0.231 3.693
17 0.25 0.919 0.230 3.905
18 0.25 0.914 0.229 4.114
19 0.25 0.910 0.227 4.321
20 0.25 0.905 0.226 4.525
21 0.25 0.901 0.225 4.728
22 0.25 0.896 0.224 4.928
23 0.25 0.892 0.223 5.127
24 0.25 0.887 0.222 5.323
25 0.25 0.883 0.221 5.517
26 0.25 0.878 0.220 5.709
27 0.25 0.874 0.219 5.900
28 0.25 0.870 0.217 6.088
29 0.25 0.865 0.216 6.274
30 0.25 0.861 0.215 6.458
31 0.25 0.857 0.214 6.640
32 0.25 0.852 0.213 6.820
33 0.25 0.848 0.212 6.998
34 0.25 0.844 0.211 7.174
35 0.25 0.840 0.210 7.348
 36 0.25 0.836 0.209 7.521
37 0.25 0.831 0.208 7.691
38 0.25 0.827 0.207 7.860
39 0.25 0.823 0.206 8.027
40 0.25 0.819 0.205 8.191
41 0.25 0.815 0.204 8.354
42 0.25 0.811 0.203 8.516
43 0.25 0.807 0.202 8.675
44 0.25 0.803 0.201 8.833
45 0.25 0.799 0.200 8.988
46 0.25 0.795 0.199 9.142
47 0.25 0.791 0.198 9.295
48 100.25 0.787 78.907 3787.518

Intrinsic Value 89.35 4,028.70

BOND B

Life CF DF at Yield Rate 1.17% PV Life * PV

0 -485
1 5 0.988 4.942 4.942
2 5 0.977 4.885 9.770
3 5 0.966 4.829 14.486
4 5 0.955 4.773 19.091
5 5 0.944 4.718 23.588
6 5 0.933 4.663 27.979
7 5 0.922 4.609 32.265
8 5 0.911 4.556 36.448
9 5 0.901 4.503 40.530
10 5 0.890 4.451 44.513
11 5 0.880 4.400 48.399
12 5 0.870 4.349 52.188
13 5 0.860 4.299 55.884
14 5 0.850 4.249 59.487
15 5 0.840 4.200 63.000
16 5 0.830 4.151 66.424
17 5 0.821 4.104 69.760
18 5 0.811 4.056 73.010
19 5 0.802 4.009 76.175
20 505 0.793 400.252 8005.043

1.17% Intrinsic Value 485.00 8,822.98

BOND C

Life CF DF at Yield Rate 3.5% PV Life * PV

 1 25 0.966 24.155 24.155
2 25 0.934 23.338 46.676
3 25 0.902 22.549 67.646
4 25 0.871 21.786 87.144
5 25 0.842 21.049 105.247
6 25 0.814 20.338 122.025
7 25 0.786 19.650 137.548
8 25 0.759 18.985 151.882
9 25 0.734 18.343 165.089
10 25 0.709 17.723 177.230
11 25 0.685 17.124 188.360
12 1025 0.662 678.328 8139.935

Intrinsic Value 903.37 9,412.94

BOND D

Life CF DF at Yield Rate 3.59% PV Life * PV

0 -1720
1 90 0.965 86.881 86.881
2 90 0.932 83.870 167.740
3 90 0.900 80.963 242.890
4 90 0.868 78.158 312.630
5 90 0.838 75.449 377.245
6 90 0.809 72.834 437.005
7 1590 0.781 1242.145 8695.015

3.59% Intrinsic Value 1,720.30 10,319.41

BOND E

Life CF DF at Yield Rate 9% PV Life * PV

1 0 0.917 0.000 0.000
2 140 0.842 117.835 235.670
3 0 0.772 0.000 0.000
4 140 0.708 99.180 396.718
5 0 0.650 0.000 0.000
6 140 0.596 83.477 500.865
7 0 0.547 0.000 0.000
8 2140 0.502 1073.994 8591.951

Intrinsic Value 1,374.49 9,725.20

The face value for bond A is RM 100 and the Intrinsic value is RM 89. As a result the value is
gone around RM 11 and it will be selling at discount rate 11% ,which is below the par
value. The fair price is less, you will buy the Bond A, and it shows that you are efficiency.

Duration =PV * LIFE

PV
45.09 years
The duration for Bond A is 45.09 years, the slope of the price yield line is denoting the
risk of the bond.

MD = (-)D
1+ R
44.86 years
The modified duration for Bond A is 44.86 years,

VaR =Investment * changes in YR * MD

44,862.15
We invested RM10 mill, but it incured to RM 44,862.15 loss if tomorrow is a bad day.
As this is a small figure, we can either insure it or not
The face value for bond B is RM 500 and the Intrinsic value is RM 485. As a result the value is
gone around RM 15.079 and it will be selling at discount rate 3% ,which is below the par
value.The yield rate equalized RM 485 to sum amount of present value.
The fair price is less, you will buy the Bond B, and it shows that you are efficiency.

Duration =PV * LIFE

PV
18.19 years
The duration for Bond B is 18.19 years, the slope of the price yield line is denoting the
risk of the bond.

MD = (-)D
1+ R
17.98 years
The modified duration for Bond A is 44.86 years,

VaR =Investment * changes in YR * MD

179,815.69
We invested RM10 mill, but it incured to RM 179,815.69 loss if tomorrow is a bad day.
As this is a small figure, we can either insure it or not

The face value for bond C is RM 1000 and the Intrinsic value is RM 903.37. As a result the value is
gone around RM 96.63 and it will be selling at discount rate 9.7% ,which is below the par
value. The fair price is less, you will buy the Bond C and it shows that you are efficiency.

Duration =PV * LIFE

PV
10.42 years
The duration for Bond C is 10.42 years, the slope of the price yield line is denoting the risk of the bond.

MD = (-)D
1+ R
10.07 years
The modified duration for Bond C is 10.07 years,

VaR =Investment * changes in YR * MD

201,349.57
We invested RM10 mill, but it incured to RM 201,349.57 loss if tomorrow is a bad day.
As this is a moderately big figure, we have to insure it.

The face value for bond D is RM 1,500 and the Intrinsic value is RM1,720.30. As a result the value is
shown negative RM 220.30 is gone and it will be selling at 14.69%,which is above the par value
Because of the fair price is more, you will not buy the bond, because it is more risky.
The yield rate equalized RM 1,720 to sum amount of present value.If you buy the bond D, it showns that
you are inefficiency.

Duration =PV * LIFE

PV
6.00 years
The duration for Bond D is 6 years, the slope of the price yield line is denoting the risk of the bond.

MD = (-)D
1+ R
5.79 years
The modified duration for Bond D is 5.79 years,

VaR Investment * changes in YR * MD

289,536.06
We invested RM10 mill, but it incured to RM 289,536.06 loss if tomorrow is a bad day.
We have to insure it because this is a big figure.

The face value for bond E is RM 2,000 and the Intrinsic value is RM 1,374.49. As a result the value is
gone around RM 625.51 and it will be selling at discount rate 31.28% ,which is below the par
value. The fair price is less, you will buy the Bond E, and it shows that you are efficiency.

Duration =PV * LIFE

PV
7.08 years
The duration for Bond E is 7.08 years, the slope of the price yield line is denoting the
risk of the bond.

MD = (-)D
1+ R
6.49 years
The modified duration for Bond E is 6.49 years,

VaR =Investment * changes in YR * MD

649,130.32
We invested RM10 mill, but it incured to RM 179,815.69 loss if tomorrow is a bad day.
We have to insure it because this is a big figure.
he value is
 the value is

esult the value is

the risk of the bond.

result the value is

he par value

ond D, it showns that

risk of the bond.

result the value is

w the par
QUESTION 2

A 10-year annual coupon bond with a face value of RM 1000 and a coupon rate of 8% is
priced at RM 900. What are the bonds yield, Duration, modified duration and convexity?

Life Cash Flow DF at Yield Rate PV

0 -900
1 80 0.912 72.993
2 80 0.832 66.599
3 80 0.760 60.766
4 80 0.693 55.443
5 80 0.632 50.587
6 80 0.577 46.156
7 80 0.526 42.113
8 80 0.480 38.424
9 80 0.438 35.059
10 1080 0.400 431.835

9.6% Intrinsic Value 899.97

The face value is RM 1,000 and the intrinsic value is RM 899.97.This is shows that RM 100.03 is
gone and it is selling at discount which is 10% below the par value. Because the fair price is
less, you will buy the bond, and it shows that you are efficiency. If the fair price is more than
the face value, you will not buy because it is risky and you will be inefficiency.
The yield rate equalized RM 900 to sum amount of present value.

Duration = PV * LIFE
PV
7.085
The duration which is 7.085 years, is the slope of the price yield line which is denoting the risk of
the bond.

MD = (-)D
1+ R
6.464
The Modified duration is 6.464 years
n rate of 8% is
and convexity?

PV*Life

72.993
133.198
182.297
221.773
252.934
276.935
294.791
307.394
315.528
4,318.35

6,376.20

s shows that RM 100.03 is

cause the fair price is
air price is more than

years
hich is denoting the risk of

years
QUESTION 3

RM 80 every year the bondholder receives RM 40 every six months.Calculate the six-month yield.
What is the annual rate based on semi-annual compounding? What is the effective annual rate?

Life Cash Flow DF at Yield Rate

0 -900
1 40 0.954
2 40 0.911
3 40 0.869
4 40 0.829
5 40 0.791
6 40 0.755
7 40 0.721
8 40 0.688
9 40 0.656
10 40 0.626
11 40 0.598
12 40 0.570
13 40 0.544
14 40 0.519
15 40 0.496
16 40 0.473
17 40 0.451
18 40 0.431
19 40 0.411
20 1040 0.392

4.79% Intrinsic Value

The face value for this bond is RM 1,000 and the Intrinsic value is RM 899.77. As a result the
value is gone around RM 100.3 and it will be selling at discount rate 10% ,which is below the par
value. The fair price is less, you will buy the Bond , and it shows that you are efficiency.
The yield rate equalized RM 900 to sum amount of present value.

Effective annual rate

Annual rate

Duration =

The duration which is 6.89 years, is the slope of the price yield line which is denoting
the risk of the bond. The duration is less, therefore the risk and the slope will be low.

MD =

The Modified duration is 13.15 years

hs.Calculate the six-month yield.
at is the effective annual rate?

PV PV*Life

38.172 38.172
36.427 72.853
34.762 104.285
33.173 132.691
31.656 158.282
30.209 181.256
28.828 201.799
27.511 220.085
26.253 236.278
25.053 250.531
23.908 262.987
22.815 273.781
21.772 283.038
20.777 290.878
19.827 297.409
18.921 302.735
18.056 306.953
17.231 310.153
16.443 312.418
407.978 8,159.56

899.77 12,396.14
ue is RM 899.77. As a result the
t rate 10% ,which is below the par
ws that you are efficiency.

= 9.81%

= 9.58%

PV * LIFE
PV
13.78 years

line which is denoting

d the slope will be low.

(-)D
1+ R
13.15 years
I) CONVENTIONAL BONDS
Top of Form
Bottom of Form

Tender Stock Issue Maturity

Date Name
MTB 14/2009 Date Date
19/03/2009 182D 18.09.2009
BNMN-DB 6/2009 20/03/2009 18/09/2009
18/03/2009 91D 07.05.2009
17.04.2009 - 19/03/2009 7/5/2009
18/03/2009 Tranche
BRSB CPNo92D
47 19/03/2009 17/04/2009
17/03/2009 18.06.2009
12/2009 91D 18/03/2009 18/06/2009
16/03/2009 16.06.2009
KPJ CP 92D 17/03/2009 16/06/2009
13/03/2009 16.06.2009
PRESTAR CP 16/03/2009 16/06/2009
13/03/2009 122D 16.07.2009
5.09400% 16/03/2009 16/07/2009
12/3/2009 30.04.2014
KPJ CP 91D 13/03/2009 30/04/2014
12/3/2009 12.06.2009
MTB 13/2009 91D 13/03/2009 12/6/2009
12/3/2009 12.06.2009
BNMN-DB 8/2009 13/03/2009 12/6/2009
11/3/2009 91D 21.05.2009
10.04.2009 - 12/3/2009 21/05/2009
11/3/2009 Tranche
BNMN-DBNo 467/2009 12/3/2009 10/4/2009
10/3/2009 91D 14.05.2009
10.04.2009 - 10/3/2009 14/05/2009
10/3/2009 Tranche No 45
PBM SB CP 30D 10/3/2009 10/4/2009
10/3/2009 10.04.2009 11/3/2009 10/4/2009
II) ISLAMIC BONDS

Top of Form
Bottom of Form

Tender Stock Issue Maturity

Date Name
139/2008 63D Date Date
10/12/2008 12.02.2009
BDB ICP 90D 11/12/2008 12/2/2009
10/12/2008 11.03.2009
ICP 33D 11/12/2008 11/3/2009
10/12/2008 13.01.2009
136/2008 37D 11/12/2008 13/01/2009
9/12/2008 15.01.2009
ESSO ICP 30D 9/12/2008 15/01/2009
9/12/2008 09.01.2009
TSH RES ICP 33D 10/12/2008 9/1/2009
9/12/2008 12.01.2009
TSH RES ICP 33D 10/12/2008 12/1/2009
9/12/2008 12.01.2009 10/12/2008 12/1/2009
Announced Amount Actual Successful
Amount Bidded Issue Yield
100
1,000.00
25
5
1,000.00
28 113 28 3.202
13 13 13 4.311
4,500.00 6,581.00 4,500.00 3.735
20 100 20 3.255
80 274 80 1.944
1,500.00 4,650.00 1,500.00 1.945
20 40 20 3.2
1,500.00 2,875.00 1,500.00 1.955
27 47 27 3.239
40 0 0
 Announced Amount Actual
Amount Bidded Issue
12/2/2009 200 666 200
11/3/2009 7 0 0
13/01/2009 5 0 0
15/01/2009 200 535 200
9/1/2009 50 140 50
12/1/2009 25 25 25
12/1/2009 40 104 40
 Successful
Price

3.202 99.199
4.311 98.579
3.735 106.291
3.255 99.195
1.944 99.518
1.945 99.628
3.2 99.746
1.955 99.653
3.239 99.725
Successful Successful
Yield Price
2.959 99.492

2.952 99.702
3.531 99.711
3.802 99.658
3.791 99.659
QUESTION 5

Go the FAST menu of Bank Negara Malaysia website and down load any one page of bond data and from
it you choose any three bonds for investment. You explain and justify your bond selection criteria for investment.

Bonds Name CIMBBANK

Coupon rate 6.70%
Issue Amount 1,000,000,000.00
Outstanding Amount 1,000,000,000.00
Issue Date 7/10/2008
Maturity Date 7/10/2038
Current Rating AA-
Stock Status Active

When we want to buy bond, we should know several criteria before invest in the bond.
the bonds.The criteria should be concern before buying a bonds is the bond names or company,
the coupon rate,issue amount, outstanding amount, issue date, maturity date, current rating,
stock status and others.For a example the above bond is CIMBBANK's bond.
Where, most of the Malaysian people well known about the CIMBBANK. The coupon rate of
the bond is 6.7%. The amount of bonds issued is 1,000,000,000.00 and outstanding amount
is 1,000,000,000.00. The issueing date for the bond is 7/10/2008 and the maturity date is 7/10/2038.
So the life of the bond is 30 years.The current rating is AA-, it is that mean the bond is very good
At the same time it is a active stock and also actively traded.If the coupon rate of bond is high is
not will gives a high return.At the same way, if the bond's coupon rate, it also will not gives
less return. The bond buyers can purchase this bond because the current rating is very good and also
active bonds. This bond are risky,because the life time period is so long, 30 years.

Bonds Name OCBC LIMITED

Coupon rate 4.60%
Issue Amount 600,000,000.00
Outstanding Amount 600,000,000.00
Issue Date 6/6/2008
Maturity Date 6/6/2018
Current Rating AAA
Stock Status Active

The above bond is OCBC LIMITED bond.

Where, most of the Malaysian people well known about the OCBC BANK. The coupon rate of
the bond is 4.60%. The amount of bonds issued is 600,000,000.00 and outstanding amount
is 600,000,000.00. The issueing date for the bond is 6/6/2008 and the maturity date is 6/6/2018
So the life of the bond is 10 years.The current rating is AAA, it is mean that the bond is excellence
At the same time it is a active stock and also actively traded.If the coupon rate of bond is high is
not will gives a high return.At the same way, if the bond's coupon rate, it also will not gives
less return. The bond buyers can purchase this bond because the current rating is excellence.
and also a active bond.This bond are less risky,because the life time period is short just 10 years
 Bonds Name TENAGA
Coupon rate 6.30%
Issue Amount 1,000,000,000.00
Outstanding Amount 1,000,000,000.00
Issue Date 16/08/2001
Maturity Date 16/08/2011
Current Rating AA1
Stock Status Active

The above bond is TENAGA bond.

Where, most of the Malaysian people well known about the TENAGA NASIONAL.
The coupon rate of the bond is 6.30%. The amount of bonds issued is 1,000,000,000.00
and outstanding amount is 1,000,000,000.00. The issueing date for the bond is16/08/2001 and the
maturity date is16/08/2011.So the life of the bond is 10 years.The current rating is AA1,it is mean that
the bond is very-very good.At the same time it is a active stock and also actively traded.
If the coupon rate of bond is high is not will gives a high return.At the same way, if the bond's
coupon rate, it also will not gives less return. The bond buyers can purchase this bond because the
current rating for this bond is very good and also a active bond.
This bond are less risky,because the life time period is short just 10 years.
nd data and from
n criteria for investment.

7/10/2038.

od and also
t is mean that