NCB issued semiannual bonds that matures after 10 years, with coupon rate of 10%

and discount rate of 9% and face value of SR1000, as CFO of Saudi Company, you

are required to:

1. List the bond features being offered (1)

2. Draw the timeline of the cash flow (1)

3. What is the Coupon payment (1)

4. Determine the right formula of present value (discounting) to be used (1)

5. Review the formula to account compounding frequency (annuity payments,

interest rate) if there is a need. (2)

6. Calculate the bond’s current price/value (1)

7. What do you understand from valuation/price? In other words, is the bond

price higher or less than face value? and why? (2)

8. Calculate the current yield of the bond. (1)

9. How much is the capital gains of the bond? (1)

10. Does bond value decrease or increase to maturity? Why? (2)

11. Assume that the bond is callable; do you recommend the bond issuer to

call? Why? (2)

Answer rating: 100% (QA)

NCBs Bond Analysis 1 Bond Features Type Semiannual coupon bond Maturity 10 years Coupon Rate 10 per annum 5 per semiannual period Discount Rate 9 per ... View the full answer