Mathematics · Bond Valuation
An investor is considering purchasing a bond issued by State Finance Corporation. The bond has a Face Value (FV) of Rs 100, an annual Coupon Rate (C) of 9%, and a remaining life of 4 years. The investor's Required Rate of Return (RRR) for similar-risk bonds is currently 8%. Which of the following options correctly calculates the present value of the total coupon payments, the present value of the Face Value, and the intrinsic value (Bond Price) of the bond? (Use 3 decimal places for present value fa ctors: PV Annuity Factor at 8% for 4 years = 3.312, and PV Factor at 8% for year 4 = 0.735).
- 1PV of Coupons: Rs 29.890; PV of FV: Rs 73.503; Intrinsic Value: Rs 103.393.
- 2PV of Coupons: Rs 32.553; PV of FV: Rs 72.800; Intrinsic Value: Rs 105.353.
- 3PV of Coupons: Rs 30.709; PV of FV: Rs 75.980; Intrinsic Value: Rs 106.689.
- 4PV of Coupons: Rs 29.808; PV of FV: Rs 73.500; Intrinsic Value: Rs 103.308.✓
Correct answer
PV of Coupons: Rs 29.808; PV of FV: Rs 73.500; Intrinsic Value: Rs 103.308.
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