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 |
---|---|---|
Cash Flow | 90 | 1110 |
PV Factor @ 11% | 3.102 | 0.658 |
PV of Cash Flow | 279.22 | 730.38 |
Total Present Value 1009.6 |