BUS 325:-Financial Management- Bonds Module 5

Description

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This module examined the variables that determined bond valuations and some of their relationships. In this assignment you are asked to develop a voice-over PowerPoint presentation on bond valuation explaining the variables and calculations involved. Show your step-by-step calculations and explanations clearly in your submission. The following may act as a guide when developing your PPT.

Exercise 1: Bond Variables:

• Face Value (P): $1,000
• Coupon Rate (I): 7% (0.07 as a decimal)
• Time to Maturity (T): 10 years
• Yield to Maturity (Y): 6% (0.06 as a decimal)

Calculate the value of the bond using the bond valuation formula discussed in the reading. Show all your calculations step-by-step and provide the final bond value.

Exercise 2: Proving the Answer Using the bond details from Exercise 1, prove the correctness of your calculated bond value. Calculate the present value of all future cash flows and verify if it matches the bond value. Show all your calculations step-by-step and provide a brief explanation of your results.

Exercise 3: Interest Rate Sensitivity Explain how the bond value is affected when: a) The coupon rate (I) increases while the yield to maturity (Y) remains the same. b) The yield to maturity (Y) decreases while the coupon rate (I) remains the same.

Exercise 4: Real-World Bond Example Research and find a real-world example of a bond issued by a company or government. Provide the bond details (face value, coupon rate, time to maturity, and yield to maturity) and calculate the bond value using the formula discussed in the presentation. Briefly explain the significance of this bond for the issuer and investors.

Exercise 5: Discussion Question In your own words, explain why bond valuation is important for both investors and issuers. Discuss the factors that influence a bond’s value in the market.