# Bonds Valuation Calcs

## Part 1 – Bonds Valuation Calcs

 BUS-FPX3062 Assessment 3 Template Part 1: Bond Valuation Solve the following problems and answer the last question. Example problems can be found on the “Bond Valuation Example” tab below. Create appropriate formulas using the supplied values in the corresponding cells so Excel can calculate the answer. 1. Compute the price of a 3.8% coupon bond with 18 years left to maturity and a market interest rate of 7%. Compute the price again if interest payments are paid semi-annually (solve using semi-annual compounding). Par value is \$1000. [Annual Compounding Answer] [Semi-annual Compounding Answer] 2. A 6.50% coupon bond with 18 years left to maturity is offered for sale at \$1,035.25. What yield to maturity [interest rate] is the bond offering? Assume interest payments are paid semi-annually, and solve using semi-annual compounding. Par value is \$1000. [Annual Compounding Answer] [Semi-annual Compounding Answer] 3. You have just paid \$1,135.90 for a bond, which has 10 years before it, matures. It pays interest every six months. If you require an 8% return from this bond, what is the coupon rate on this bond? Par value is \$1000. [Answer here] 4. A company XYZ issued 30 year bonds with 10% annual coupon rate at their par value of \$1000 in 2010. The Bonds had a 7% call premium, with 5 years of call protection. Today XYZ called the bonds. Compute the realized rate of return for an investor who purchased the bonds when they were issued in 2010. Briefly explain why the investor should or should not be happy. [Answer here] [Explanation here] 5. ABC Corporation outstanding bonds have a par value of \$1000, 8% coupon and 15 years to maturity and a 10% YTM. What is the bond’s price? [Answer here] 6. What does a call provision (call feature) allow (bond) issuers to do and under what circumstances would they do it? [Answer here]

## Part 2 – Stocks Valuation Calcs

 Part 2: Stock Valuation Solve the following problems and answer the last question. Create appropriate formulas using the supplied values in the corresponding cells so Excel can calculate the answer. Example problems can be found on the “Stock Valuation Example” tab below. Show your work. ß 1. On March 5, 2013, the Dow Jones Industrial Average set a new high. The index closed at 14,253.77, which was up 125.95 that day. What was the return (in percent) of the stock market that day? [Answer here] 2. Your discount brokerage firm charges \$9.50 per stock trade. How much money do you need to buy 300 shares of Time Warner, Inc. (TWX), which trades at 22.62? [Answer here] 3. Financial analysts forecast XYZ company’s growth for the future to be a constant 8%. XYZ’s recent dividend was \$0.88. What is the value of XYZ stock when the required return is 12%? [Answer here] 4. A preferred stock from ABC pays \$3.55 in annual dividends. If the required return on the preferred stock is 6.7%, what is the value of the stock? [Answer here] 5. QRST has earnings per share of \$1.56 and a P/E ratio of 32.48. What’s the stock price? [Answer here] 6. Explain why the S&P 500 Index might be a better measure of stock market performance than the Dow Jones Industrial Average. [Answer here]