LIVE PROJECT

TO CALCULATE THE PRESENT VALUE

AND YTM OF THE BOND

Submitted by:-
Mayuri Gariba
Mudit Agrawal
Nikhil Bakre Submitted to:-
Nikita Agrawal MRS. Prashant Jain
Pooja Zaveri
Faculty(F.M)

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Objective
 
Introduction
 
Formula
 
Data

Calculation
 
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 To calculate Present Value(PO) and Yield to
Maturity(YTM) of a Bond

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BONDS:-
 In finance, a bond is a debt security, in which

the authorized issuer owes the holders a debt

and is obliged to repay the principal and
interest (the coupon) at a later date.

 Bonds and stocks are both securities, but the

major difference between the two is that stock-
holders are the owners of the company
whereas bond-holders are lenders to the
issuing company.
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 Another difference is that bonds usually have a
defined term, or maturity, after which the bond is
redeemed, whereas stocks may be outstanding
indefinitely.

 An exception is a consol bond, which is a perpetuity

(i.e., bond with no maturity).

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21/10/2008 PRESENT VALUE AND YTM 6
 FACE VALUE:-

The face value of bonds usually represents the

principal or redemption value.
 
Interest payments are expressed as a percentage of
face value.

Before maturity, the actual value of a bond may be

greater or less than face value, depending on the
interest rate payable and the perceived risk of
default.

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As bonds approach maturity, actual value
approaches face value.
 
Its also called as Par value .

A BOND is generally issued at the par value of

Rs 100 and sometimes Rs 1000.

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 Coupon rate or Interest:-
 The coupon or coupon rate of a bond is the amount of
interest paid per year expressed as a percentage of the
face value of the bond.

Maturity:- 

The bond's maturity date refers to a future date on

which the issuer pays the principal to the investor.
Bond maturities usually range from one day up to
30 years or even more.
 
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 Redemption value:-
 
 The value which the bond holder gets on maturity
is called Redemption value.

 A bond may be redeemed at par, at premium

(more than par) or at discount (less
than par).

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 When a bond sells at a discount, YTM > current
yield > coupon yield.

When a bond sells at a premium, coupon yield

> current yield > YTM.

When a bond sells at par, YTM = current yield

= coupon yield amt

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 Present Value:-

PO = I (PVIFAkd,n) + F (PVIFkd,n)

= I {(1+k)n – 1/k(1+k)n} + F {1/(1+k)n}

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Yield to Maturity:-
 
YTM = {I+ (F-P)/n} / (F+P)/2

Where:-
I = Annual Interest
kd = k = Required rate of return
n = Maturity period of bond
Po = Present Value of bond
F = Par value repayable at the maturity
P = Current market price of the bond

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Bond Company name Mkt Annual ROR( Maturity Face value
Holder price Interest (I) kd = period(n) or Par
(P) k) value (F)
Navin Shah Bank of Baroda 101.00 8.95% 10% 10yrs 1000

Hariom BSES Ltd. 96.00 5.95% 7% 15yrs 1000

Gupta

Ankit Canara bank 126.00 9.00% 11% 15yrs 1000

Agrawal

Narendra CITICORP 195.00 10.25% 8% 3yrs 1000

Jain FINANCE
LIMITED
Sumeet EXIM BANK 86.00 9.04% 10% 5yrs 1000
Natwani

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 Present Value:-
PO = I (PVIFAkd,n) + F (PVIFkd,n)

= I {(1+k)n – 1/k(1+k)n} + F {1/(1+k)n}

= 89.5{(1+0.10)10 - 1/0.10(1+0.10)10}
+1000{(1/(1+0.10)10}

= 3737. 50
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Yield to Maturity:-
 
YTM = {I+ (F-P)/n} / (F+P)/2

= {89.5 + (1000-101)/10} /
(1000+101)/2

= 179.4/550.5

= 0.32
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