Sub: Finance Topic: Bond Valuation
Calculation of value of bond and intrinsic value
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1) Ciza Inc. raised $100 million by floating corporate bonds. Each bond paid a coupon of 7 percent with a
Par Value of $1000.00 and will mature in 4 years.
a. Determine the current market value of the bond if your required rate of return is 14 percent.
b. Holding everything constant and assuming that the coupon is paid on a semiannual basis, what is
the intrinsic value of the bond to you? Discuss your answer
c. Now assume annual coupon payments but 20 years remaining to maturity, what is the value of the
bond? Discuss your answer.
d. What is the bond’s current yield? Discuss your answer.
2) Zota Inc., has a bond issue outstanding with 8 years remaining to maturity, a coupon rate of 10
percent with interest paid annually, and a Par Value of $1000.
If the current market price of the bond is $814.45, what is the bond’s yield to maturity? Discuss your
3) Hilo Inc. of Chandler, Arizona has floated some zero coupon bonds to finance its capital expenditures.
The Par Value of each bond is $1000.
a. Assuming a market price of $300 with a maturity of 30 years, determine and discuss the bond’s
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