07 task performance financial management sti

BM215 NAME: DATE: SCORE: Bonds (25 points: 5 items x 5 points) Read and analyze the given scenarios and provide what is asked. Show your complete solutions. Bond Valuation For items 1-3: The Peninsula Corporation issued a new series of bonds on January 1, 1992. The bonds were sold at par (P1,000), had a 12% coupon, and will mature in 30 years on December 31, 2021. Coupon payments are made semiannually (on June 30 and December 31). 1. What was the YTM on January 1, 1992? 2. What was the price of the bonds on January 1, 1997, five (5) years later, if interest rates had fallen to 10%? 3. Find the current yield, capital gains yield, and total return on January 1, 1997, given the price as determined in part 2. For items 4-5: The Valencia Development Company (VDC) is planning to sell a P100,000,000, 10-year, 12%, semiannual payment bond issue. Provisions for a sinking fund to retire the issue over its life will be included in the indenture. Sinking fund payments will be made at the end of each year, and each payment must be enough to retire 10% of the original amount of the issue. The last sinking fund payment will retire the last of the bonds. The bonds to be retired each period can be purchased on the open market or obtained by calling up to 5% of the original issue at par, at VDC's option. 4. How large must each sinking fund payment be if the company uses the option to call bonds at par? 5. How large must each sinking fund payment be if the company decides to buy bonds on the open market? (You can only answer in words.)