PArT 2: VALUATION, rISk AND reTUrN
FIGUre 4.1 TIME LINE FOR BOND VALUATION (ASSUMING ANNUAL INTEREST PAYMENTS)
Platypus United 9.125% coupon, $1,000 face value bond, maturing at end of 2022; required return equals 8%
2011 2012 2013 2014 2020 2021 2022
$84.49
$78.23
$72.44
..
..
..
..
.
$45.65
$42.27
$39.14
$91.25 $91.25 $91.25 .............. $91.25 $91.25 $91.25 $1,000
End of year
$ 651.43
+
$ 428.88
$ 1,080.31 Price
................
Calculator
Input Function
–1,000 FV
–91.25 PMT
11 N
8 I
CPT
PV
Solution 1,080.31
Formula B5: PV(B4,B3,B2,B1)
Present value $1,080.31
Number of periods 11
–$91.25
–$1,000
Payment
Future value
Row
Column
Spreadsheet
1
2
3
4 Interest rate 8%
5
6
A B
example