Q1. Show the relationship between required rate of return and coupon rate on the value of a bond.
A1. It is important for prospective bond buyers to know how to determine the price of a bond because it will indicate the yield received should the bond be purchased. In this section, we will run through some bond price calculations for various types of bond instruments. Bonds can be priced at a premium, discount, or at par
Anything but Ordinary: Calculating the Present and Future Value of Annuities and Understanding the Time Value of Money
Q2. What do you understand by operating cycle?
Q5. An employee of a bank deposits Rs. 30000 into his PF A/c at the end of each year for 20 years. What is the amount he will accumulate in his PF at the end of 20 years, if the rate of interest given by PF authorities is 9%? Hint Amount= 1534800
30000*FVIFA (9%, 20Y)
This implies that the company is offering the bond at Rs. 1000 but is worth Rs. 924.28 at the required rate of return of 10%. The investor may not be willing to pay more than Rs. 924.28 for the bond today.