DATE: 12/31/2002

1. Calculation of Yield to Maturity

Bond settlement maturity coupon WA of coupon price redemption frequency basis YTM in %
131 12/31/2002 4/6/2005 9% 0.00 108.75 100 1 4 4.81%
132 12/31/2002 7/13/2005 8% 0.00 108.51 100 1 4 4.36%
133 12/31/2002 8/17/2010 8.50% 0.00 121.02 100 1 4 5.10%
134 12/31/2002 9/21/2007 8% 0.01 113.02 100 1 4 4.84%
142 12/31/2002 1/30/2006 8% 0.01 110.00 100 1 4 4.45%
161 12/31/2002 7/11/2011 8.14% 0.01 103.20 100 1 4 7.60%
163 12/31/2002 9/19/2011 8.30% 0.01 122.10 100 1 4 5.09%
166 12/31/2002 1/16/2007 7.80% 0.01 110.23 100 1 4 4.95%
170 12/31/2002 2/13/2007 7.65% 0.01 110.11 100 1 4 4.88%
174 12/31/2002 3/13/2012 7.50% 0.01 118.84 100 1 4 4.90%
7.95%
weighted average of coupon
1.30477318382925

2. Calculation of yield curve

State bond Maturity date Years to maturity YTM

131 4/6/2005 2.30 4.81
132 7/13/2005 2.57 4.36
142 1/30/2006 3.13 4.45
166 1/16/2007 4.10 4.95
170 2/13/2007 4.18 4.88
134 9/21/2007 4.79 4.84
133 8/17/2010 7.74 5.10
161 7/11/2011 8.65 7.60
163 9/19/2011 8.84 5.09
174 3/13/2012 9.33 4.90

Equation is calculated directly by the trendline function in the graph.

Yield curve - State bonds

YTM (%)

10.00
9.50
9.00
8.50
8.00
 Yield curve - State bonds
YTM (%)

10.00
9.50
9.00
8.50
8.00
7.50
7.00
6.50
6.00
5.50
5.00
4.50
f(x) = − 0.0105136256121899 x² + 0.302651220662782 x
4.00
3.50
+ 3.81388711014287
3.00
2.50 R² = 0.298148861573107
2.00
1.50
1.00
0.50
0.00
1 2 3 4 5 6 7 8 9 10
roky

3. Calculation of YTM
priemerna splatnost zavazkov
Item Maturity date Years to maturity YTM
Odchodne 2/20/2024 21.4 5.48
Energia - súčas 11/13/2017 15.1 5.99
Odstupné V1 1/22/2011 8.2 5.59
Energia - dôcho 8/31/2009 6.8 5.38
Energia - súčas 8/1/2011 8.7 5.65
Odmena 50 roko 11/8/2013 11.0 5.87

4. Calculation of price (market value of bond mature in average maturity period)

Bond settlement maturity coupon redemption frequency basis YIELD price

Odchodne 12/31/2002 2/20/2024 7.95% 100.00 1 4 5.4800% 130.4551
Energia - súčas 12/31/2002 11/13/2017 7.95% 100.00 1 4 5.9900% 118.9182
Odstupné V1 12/31/2002 1/22/2011 7.95% 100.00 1 4 5.5900% 114.9741
Energia - dôcho 12/31/2002 8/31/2009 7.95% 100.00 1 4 5.3800% 114.0389
Energia - súčas 12/31/2002 8/1/2011 7.95% 100.00 1 4 5.6500% 115.2609
Odmena 50 roko 12/31/2002 11/8/2013 7.95% 100.00 1 4 5.8700% 116.3300
782 x

10
Years to maturity Yield to maturity
1 2%
2 4%
3 5%
4 7%
5 7%
6 7%
7 7%
Axis Y = Yield to maturity

8%

7%

6%

5%

4%

3%

2%

1%

0%
0 1 2 Axis X 3= Years 4to maturity
5 6 7 8
Years to maturity Yield to maturity
1 9% 2% 0.019
2 7% 2.40% 0.035
3 5% 3.30% 0.049
4 4% 4.10% 0.065
5 3% 5.30% 0.069
6 2% 6.90% 0.072
7 2% 8.50% 0.074
Axis Y = Yield to maturity

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%
0 1 2 Axis X 3= Years 4to maturity
5 6 7 8
www.ifrsbox.com Extrapolation along yield curve

You work as a finance analyst and your CFO asked you to establish fair value of bonds in your company's portfolio as of 30 September 2010. You review
bond's portfolio finding that particularly 1 issue of bonds is not traded publicly, so market data is not available. It is a bond issued by big pharmaceutical
US company BetaHealth, who manufactures generic drugs and is considered as a high-quality debtor with a very small credit risk. Your company holds 6
pieces of this issue.
Bond's characteristics are as follows: face value = 100 000 USD, coupon rate = 5.4%, maturity date = 15 April 2018, redemption is at par, frequency of
coupon repayment is semi-annual.
Try to set fair value of this bond by extrapolation along a yield curve of similar-quality bonds.

Settlement date: 9/30/2010

1. Selection of bonds and calculation of Yield to Maturity

Issuer Maturity Years to maturity Coupon Price Redemption Frequency Basis YTM in %
Abbott Labs 5/27/2040 30.09 5.300% 112.72 100 2 1 4.52%
Abbott Labs 11/30/2017 7.27 5.600% 120.87 100 2 1 2.41%
Abbott Labs 5/15/2011 0.63 5.600% 105.57 100 2 1 -3.15%
Merck Co & Inc. 11/15/2036 26.51 5.750% 121.48 100 2 1 4.36%
Merck Co & Inc. 1/1/2026 15.48 6.300% 123.86 100 2 1 4.17%
Merck Co & Inc. 6/30/2019 8.88 5.000% 117.41 100 2 1 2.75%
Merck Co & Inc. 3/1/2015 4.48 4.750% 115.42 100 2 1 1.16%
Merck Co & Inc. 11/15/2011 1.14 5.125% 107.43 100 2 1 -1.40%
Pfizer Inc. 3/15/2039 28.87 7.200% 141.39 100 2 1 4.58%
Pfizer Inc. 3/15/2019 8.58 6.200% 124.12 100 2 1 2.96%
Pfizer Inc. 3/15/2015 4.52 5.350% 117.10 100 2 1 1.38%
Pfizer Inc. 3/15/2012 1.48 4.450% 107.54 100 2 1 -0.68%

Formula used:
YIELD(settlement;maturity;coupon;price;redemption;frequency;basis)

2. Yield curve
www.ifrsbox.com Extrapolation along yield curve

Chart Title
6.00%
5.00% f(x) = − 0.000168608030998747 x² + 0.00715924629942 x − 0.0218939862358149
R² = 0.943087382480064
4.00%
3.00%
2.00% YTM in %
1.00% Polynomial (YTM
in %)
0.00%
0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00
-1.00%
-2.00%
-3.00%
-4.00%

3. Calculation of YTM for BetaHealth bond

Maturity: 4/15/2018 A

Settlement date: 9/30/2010 B

Years to maturity: 7.65 (A-B)/360

Yield to maturity (YTM): 2.15% using trendline equation from yield curve
(y=-0,0002*x*x+0,0072*x-0,0219)

4. Estimation of fair value of BetaHealth bond

www.ifrsbox.com Extrapolation along yield curve

Settlement date: 9/30/2010

Maturity: 4/15/2018

Coupon rate: 5.40%

Yield to maturity: 2.15%

Redemption: 100

Frequency: 2

Basis: 1
Formula used:
Fair value per 100 USD of face value: 122.53 PRICE(settlement;maturity;coupon;YTM;redemption;frequency;basis)

Fair value of bonds in portfolio: 735,188.05 USD

(6 pieces x 100 000 USD x 122,53 / 100)
 www.ifrsbox.com Extrapolation along yield curve

ber 2010. You review

by big pharmaceutical
Your company holds 6

at par, frequency of