8% Coupon Bond

FV
T
RR

1000
20
10% yield to maturity (YTM)

Time

cash flow
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38

Required Return = 10%

PV
discounting t
40
0.9523809524 38.09524
40
0.9070294785 36.28118
40
0.8638375985 34.5535
40
0.8227024748 32.9081
40
0.7835261665 31.34105
1040
0.7462153966 776.064
40
0.7106813301 28.42725
40
0.676839362 27.07357
40
0.6446089162 25.78436
40
0.6139132535 24.55653
40
0.5846792891 23.38717
40
0.5568374182 22.2735
40
0.5303213506 21.21285
40
0.505067953 20.20272
40
0.4810170981 19.24068
40
0.458111522 18.32446
40
0.4362966876 17.45187
40
0.4155206549 16.62083
40
0.395733957 15.82936
40
0.3768894829 15.07558
40
0.3589423646 14.35769
40
0.3418498711 13.67399
40
0.3255713058 13.02285
40
0.3100679103 12.40272
40
0.2953027717 11.81211
40
0.281240735 11.24963
40
0.267848319 10.71393
40
0.2550936371 10.20375
40
0.2429463211 9.717853
40
0.2313774487 9.255098
40
0.2203594749 8.814379
40
0.2098661666 8.394647
40
0.1998725396 7.994902
40
0.1903547996 7.614192
40
0.1812902854 7.251611
40
0.1726574146 6.906297
40
0.164435633 6.577425
40
0.1566053647 6.264215

IRR = NPV is zero, which mea

6.039989
0.351999
686.3635
142.0457
828.4091

39
40

40
1040

0.1491479664 5.965919
0.1420456823 147.7275 625.3815
1574.625

NPV is zero, which mean inflow should be equal to outflow , YTH = yield to Held

for 3 years all intermediate cash flows from 0 to 3 years is reinvested at 11% p.a. at end

0.378843
0.055
275.522

4.2533479691 190.3548
0.2626673985
647.7161603
838.071
Total return
1113.593
1.344854
8.069125

ed at 11% p.a. at end of 3 years when the investor sell the bond, the required return on a 17 year bond is 10 %

a 17 year bond is 10 % p.a. calculate total return or Yeild to held for bond holder.

Investment horizon
Maturity of bond
Coupon
Reinvestment rate
yield on 17 year bond after three year
market price
face value
total return in Rs
total return %

Time

3 year
20 year
9%
3%
5%
110%
100%

6
40
4.5
1.50%
2.50%
109.9
100
173.48
16.44

cash flow Required Return = 3%

PV
0
-109.9 discounting t
1
4.5
0.9852216749 4.433498
2
4.5
0.9706617486 4.367978
3
4.5
0.9563169937 4.303426
4
4.5
0.9421842303 4.239829
5
4.5
0.9282603254 4.177171
6
4.5
0.9145421925 4.11544
7
4.5
0.9010267907 4.054621
8
4.5
0.8877111238
3.9947
9
4.5
0.8745922402 3.935665
10
4.5
0.8616672317 3.877503
11
4.5
0.8489332332
3.8202
12
4.5
0.8363874219 3.763743
13
4.5
0.8240270166 3.708122
14
4.5
0.8118492775 3.653322
15
4.5
0.7998515049 3.599332
16
4.5
0.7880310393 3.54614
17
4.5
0.7763852604 3.493734
18
4.5
0.7649115866 3.442102
19
4.5
0.7536074745 3.391234
20
4.5
0.7424704182 3.341117
21
4.5
0.731497949 3.291741
22
4.5
0.7206876345 3.243094
23
4.5
0.7100370783 3.195167
24
4.5
0.6995439195 3.147948
25
4.5
0.689205832 3.101426
26
4.5
0.6790205242 3.055592
27
4.5
0.6689857381 3.010436
28
4.5
0.6590992494 2.965947
29
4.5
0.6493588664 2.922115
30
4.5
0.6397624299 2.878931
31
4.5
0.6303078127 2.836385
32
4.5
0.6209929189 2.794468

33
34
35
36
37
38
39
40

4.5
4.5
4.5
4.5
4.5
4.5
4.5
104.5
4%

0.6118156837
0.6027740726
0.5938660814
0.5850897353
0.576443089
0.5679242256
0.5595312568
0.5512623219

2.753171
2.712483
2.672397
2.632904
2.593994
2.555659
2.517891
57.60691
189.7475

periods
periods
Rs

rs
rs
rs

28.03298
1.315322
0.057883
102.257 43.19053 173.4806
-0.736912

16.44%
1.50%
2.00%
2.50%
3.00%
3.50%

2.50%
0.1644
0.1644
0.1644
0.1644
0.1644

3%
0.1644
0.1644
0.1644
0.1644
0.1644

3.50%
0.1644
0.1644
0.1644
0.1644
0.1644

4%
0.1644
0.1644
0.1644
0.1644
0.1644

4.50%
0.1644
0.1644
0.1644
0.1644
0.1644

4.00%
4.50%
5.00%
5.50%
6.00%

0.1644
0.1644
0.1644
0.1644
0.1644

0.1644
0.1644
0.1644
0.1644
0.1644

0.1644
0.1644
0.1644
0.1644
0.1644

0.1644
0.1644
0.1644
0.1644
0.1644

0.1644
0.1644
0.1644
0.1644
0.1644

5%
0.1644
0.1644
0.1644
0.1644
0.1644

5.50%
0.1644
0.1644
0.1644
0.1644
0.1644

6%
0.1644
0.1644
0.1644
0.1644
0.1644

0.1644
0.1644
0.1644
0.1644
0.1644

0.1644
0.1644
0.1644
0.1644
0.1644

0.1644
0.1644
0.1644
0.1644
0.1644