Let’s understand the pricing better with the help of an example
The face value of a G-Strip Bond is Rs 1000. The bond bears a coupon rate of 9% with coupon payments being made at the end of each year. The maturity of the bond is 4 years. If the bond is redeemable at a premium of 11%. What would be the present market price of the bond?
|Years||1 to 4||4|
|PV Factor @ 11%||3.102||0.658|
|PV of Cash Flow||279.22||730.38|
|Total Present Value 1009.6|