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    Q PP 4 Bonds

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    Joebel Cristales
    The document contains 8 bond valuation problems. Problem 1 asks the maximum amount of bonds a city can issue given it can raise P1M annually for a sinking fund earning 8% interest to repay 9% bonds in 20 years. Problem 2 asks the redemption price of a 10-year bond sold after 2 years with a yield of 6%. Problem 3 asks the purchase price of a 10-year bond with a 6% coupon if the yield is 8%. Problem 4 asks the annual cost of bonds with an 8% coupon sold for 95% of par value with deposits to a 6% sinking fund.

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    Q PP 4 Bonds

    Uploaded by

    Joebel Cristales
    151 views1 page
    The document contains 8 bond valuation problems. Problem 1 asks the maximum amount of bonds a city can issue given it can raise P1M annually for a sinking fund earning 8% interest to repay 9% bonds in 20 years. Problem 2 asks the redemption price of a 10-year bond sold after 2 years with a yield of 6%. Problem 3 asks the purchase price of a 10-year bond with a 6% coupon if the yield is 8%. Problem 4 asks the annual cost of bonds with an 8% coupon sold for 95% of par value with deposits to a 6% sinking fund.

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    Q-PP-4-BONDS

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    The document contains 8 bond valuation problems. Problem 1 asks the maximum amount of bonds a city can issue given it can raise P1M annually for a sinking fund earning 8% interest to repay 9% bonds in 20 years. Problem 2 asks the redemption price of a 10-year bond sold after 2 years with a yield of 6%. Problem 3 asks the purchase price of a 10-year bond with a 6% coupon if the yield is 8%. Problem 4 asks the annual cost of bonds with an 8% coupon sold for 95% of par value with deposits to a 6% sinking fund.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    151 views1 page

    Q PP 4 Bonds

    Uploaded by

    Joebel Cristales
    The document contains 8 bond valuation problems. Problem 1 asks the maximum amount of bonds a city can issue given it can raise P1M annually for a sinking fund earning 8% interest to repay 9% bonds in 20 years. Problem 2 asks the redemption price of a 10-year bond sold after 2 years with a yield of 6%. Problem 3 asks the purchase price of a 10-year bond with a 6% coupon if the yield is 8%. Problem 4 asks the annual cost of bonds with an 8% coupon sold for 95% of par value with deposits to a 6% sinking fund.

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    © All Rights Reserved
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    BONDS PROBLEMS

    1. A city will issue 9% bonds, redeemable at par in 20 years, with interest payable annually. The proceeds from
    the bond issue will be used to finance part of the public works program of the city. To pay for both the deposit
    to the sinking fund and the annual interest, it is estimated that P1M can be raised yearly through taxation. If the
    fund earns 8% compounded quarterly, what is the maximum amount of bonds which the city can issue?
    a. P8.8960 M b. P 8.9405 M c. P 8.9865 d. P 6.1623M

    2. A 10 year bond with a par value of P1,000 and with bond rate of 10% payable annually is sold after 2 years
    after purchase for P1080. If the yield is to be 6% compounded annually, how much should the redemption price
    be?
    a. P1,444 b. P 935 c. P 732 d. P925

    3. A bond, with a face value of P1000 redeemable at par in 10 years, pays dividends at the rate of 6% per annum.
    Determine the purchase price of the bond now if the yield on the bond is 8% compounded semi-annually?
    a. P909 b. P 930 c. P 856 d. P 825

    4. A corporation sold an issue of 20-year bonds having a total face value of P100,000 for P95,000. The bonds
    bear interest at 8%, payable annually. The company wishes to establish a sinking fund for retiring the bond
    issue and will make annual deposits that will earn 6%, compounded quarterly. Compute the annual cost for
    interest and redemption of these bonds.
    a. P 1,126 b. P 1,131 c. P 10,690 d. P10,679

    5. How much can be paid for P100,000, 10% bond, with interest paid annually, if the bond matures 12 years hence? Assume
    that the purchaser will be satisfied with 6% nominal interest compounded semi-annually.
    a. P126,936 b. P 133,872 c. P132,620 d. P131,825

    6. A bond with a par value of P1,000 and with bond rate of 10% payable annually is sold now for P1080. If the
    yield is to be 12%, how much should the redemption price be at the end of 8 years?
    a. P1,444 b. P 1,569 c. P 1,825 d. P1,925

    7. A bond, with a face value of P1000 redeemable at par in 15 years, pays dividends at the rate of 6% per annum.
    Determine the purchase price of the bond now if the yield on the bond is 7%?
    a. P909 b. P 1,069 c. P 1,125 d. P 825

    8. A corporation sold an issue of 20-year bonds having a total face value of P10,000 for 9,500. The bonds bear
    interest at 8% pa, payable semi-annually. The company wishes to establish a sinking fund for retiring the bond
    issue and will make semi-annual deposits that will earn 6% pa, compounded semi-annually. Compute the annual
    cost for interest and redemption of these bonds.
    a. P 1,126 b. P 1,131 c. P 1,025 d. P1,081

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