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    Present & Future Value Calculation

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    Honey Srivastava
    1) A 5-year bond that pays 7% annual coupon would be valued at Rs. 922.207 if demanding a 9% return. 2) A 10-year bond that pays 7% annual coupon would be valued at Rs. 871.6468 if demanding a 9% return. 3) If interest rates rise to 10%, the 5-year bond value would fall. Bond prices and interest rates move in opposite directions - as interest rates rise, bond prices fall and vice versa. This is because newly issued bonds will offer higher yields.

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    Present & Future Value Calculation

    Uploaded by

    Honey Srivastava
    74 views9 pages
    1) A 5-year bond that pays 7% annual coupon would be valued at Rs. 922.207 if demanding a 9% return. 2) A 10-year bond that pays 7% annual coupon would be valued at Rs. 871.6468 if demanding a 9% return. 3) If interest rates rise to 10%, the 5-year bond value would fall. Bond prices and interest rates move in opposite directions - as interest rates rise, bond prices fall and vice versa. This is because newly issued bonds will offer higher yields.

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    npv irr

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    1) A 5-year bond that pays 7% annual coupon would be valued at Rs. 922.207 if demanding a 9% return. 2) A 10-year bond that pays 7% annual coupon would be valued at Rs. 871.6468 if demanding a 9% return. 3) If interest rates rise to 10%, the 5-year bond value would fall. Bond prices and interest rates move in opposite directions - as interest rates rise, bond prices fall and vice versa. This is because newly issued bonds will offer higher yields.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    74 views9 pages

    Present & Future Value Calculation

    Uploaded by

    Honey Srivastava
    1) A 5-year bond that pays 7% annual coupon would be valued at Rs. 922.207 if demanding a 9% return. 2) A 10-year bond that pays 7% annual coupon would be valued at Rs. 871.6468 if demanding a 9% return. 3) If interest rates rise to 10%, the 5-year bond value would fall. Bond prices and interest rates move in opposite directions - as interest rates rise, bond prices fall and vice versa. This is because newly issued bonds will offer higher yields.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 9

    PRESENT & FUTURE VALUE CALCULATION

    time amnt present value


    1 2000 2195
    2 2000 4604.0125
    3 2000 7247.90371875
    4 2000 10149.5743313281
    5 2000 13334.1578286326
    6 2000 16829.2382169243
    7 2000 20665.0889430744
    8 2000 24874.9351150242
    9 2000 29495.241288739
    10 2000 34566.0273143911
    11 2000 40131.2149775442
    12 2000 46239.0084378547

    rate 9.75%
    time 12
    principle 2000
    sinking fund Rs. 7,120.61
    future value of a single cash flow Rs. 42,131.21
    present value of single cash flow Rs. 13,795.89

    CALCULATION OF EMI & %RATE


    machine down payment balance payment
    600000 150000 450000
    1000000 200000 800000
    1000000 200000 800000

    NPV, IRR & PI CALCULATION


    NPV=[=NPV((cash inflows)]
    IRR= [=IRR((outflow)*inflows]
    PI=present value of future cash flow/intial investment

    rate 18.00%
    yr cash flow
    0 -100000
    1 40000 NPV
    2 50000 PI
    3 60000 IRR
    4 20000

    rate 10.00%
    yr cash flow
    0 -100000
    1 40000 NPV
    2 30000 IRR
    3 50000 PI
    4 20000

    PRESENT & FUTURE VALUE ( annualy, semiannualy,quarterly, month

    rate 10.00%
    yr amnt to be rcvd at the end of each year
    1 10000
    2 10000
    3 10000

    ANNUALY
    PRESENT VALUE 24868.52
    FUTURE VALUE 33100.00

    SEMIANNUALY
    PRESENT VALUE 50756.92
    FUTURE VALUE 68019.13

    QUARTERLY
    PRESENT VALUE 102577.65
    FUTURE VALUE 137955.53

    MONTHLY
    PRESENT VALUE 309912.36
    FUTURE VALUE 417818.21

    DAILY
    PRESENT VALUE 9459023.90
    FUTURE VALUE 12767822.10

    MANNUALY CALCULATION OF PRESENT VALUE & FUTURE VALUE

    ANNUALY
    Rate 10%
    YR AMNT PVIF=1/(1+R)ᶯ
    1 10000 0.909090909090909
    2 10000 0.826446280991735
    3 10000 0.751314800901578

    SEMIANNUALY
    Rate 10%
    YR AMNT PVIF=1/(1+R)ᶯ
    1 10000 0.952380952380952
    2 10000 0.90702947845805
    3 10000 0.863837598531476
    4 10000 0.822702474791882
    5 10000 0.783526166468459
    6 10000 0.746215396636627

    QUARTERLY
    Rate 10%
    YR AMNT PVIF=1/(1+R)ᶯ
    1 10000 0.975609756097561
    2 10000 0.951814396192742
    3 10000 0.928599410919749
    4 10000 0.905950644799755
    5 10000 0.883854287609517
    6 10000 0.862296865960505
    7 10000 0.841265235083419
    8 10000 0.820746570813092
    9 10000 0.80072836176887
    10 10000 0.781198401725727
    11 10000 0.762144782171441
    12 10000 0.743555885045309
    CULATION

    % rate EMI time


    12.17% ? 6
    ? 70000 8
    ? 110000 8
    116641.16
    1.1664115643662
    26.69%

    112383.03
    16%
    1.12

    miannualy,quarterly, monthly, daily)

    DIRECT METHOD
    PVAF==> CASH FLOW*(1+R)ᶯ-1/R*(1+R)ᶯ

    PVAF==> 24868.5199098422
    ALUE & FUTURE VALUE

    PRESENT VALUE ANNUALY FUTURE VALUE FUTURE VALUE ANNUALY


    9090.90909090909 1.21 12100
    8264.46280991735 1.1 11000
    7513.14800901578 1 10000
    24868.5199098422 33100

    PRESENT VALUE SEMIANNUALY FUTURE VALUE FUTURE VALUE SEMIANNUALY


    9523.80952380952 1.2762815625 12762.815625
    9070.2947845805 1.21550625 12155.0625
    8638.37598531476 1.157625 11576.25
    8227.02474791882 1.1025 11025
    7835.26166468459 1.05 10500
    7462.15396636627 1 10000
    50756.9206726745 68019.128125

    PRESENT VALUE QUARTERLY FUTURE VALUE FUTURE VALUE QUARTERLY


    9756.09756097561 1.31208665780127 13120.8665780127
    9518.14396192743 1.28008454419636 12800.8454419636
    9285.99410919749 1.24886296994767 12488.6296994767
    9059.50644799755 1.21840289750992 12184.0289750992
    8838.54287609517 1.18868575366821 11886.8575366821
    8622.96865960505 1.15969341821289 11596.9341821289
    8412.65235083419 1.13140821289062 11314.0821289062
    8207.46570813092 1.103812890625 11038.12890625
    8007.28361768871 1.076890625 10768.90625
    7811.98401725727 1.050625 10506.25
    7621.44782171441 1.025 10250
    7435.55885045309 1 10000
    102577.645981877 137955.529698519
    result
    Rs. 109,979.06
    -7%
    2%
    Ques- Supoose you are consodering the purchase of a 5 yr bond that pays an annual coupon payment of 7% .
    What would you pay forthed bond if you demand a return of 9%. Do the same thnig for 5 yr and 10 yr & also calcula
    calculate the value of the bond if the interst rate rises to 10% and also calculate the value of the bond if the interest rat
    sensitivity of a bond with the chnges in interest rate (explain the relationship between bond prices and interest rates)

    Answer Coupon rate ==> 7%


    Face value ==> 1000

    5 yr bond at 9% ==> 922.207

    10 yr bond at 9% ==> 871.6468

    % change for 5 ye & 10 yr bond 5.482514

    5 yr bond at 8% ==> 960.0729

    5 yr bond at 10% ==> 886.2764

    Note- Sensitivity of a bond is depend on the interest rate on bond . Interest rate and bond pric
    interest rate rises bond price decreases.
    al coupon payment of 7% .
    r 5 yr and 10 yr & also calculate % change for 5 yr n 10 yr bond
    e of the bond if the interest rate falls to 8% you are also required to comment on the
    ond prices and interest rates)

    bond price ∞ 1/interest rate

    . Interest rate and bond price are inversely proportional to each other. As the

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