How to calculate present value?, Financial Management

Illustration 

Vishal Mehta & Co., Mumbai issued 7%, 5-year bond on 31st December 2006. The par value of a bond is Rs. 100. This bond pays interest annually and discount rate 6% should be used to calculate the present value of each cash flow. The bond is redeemed at par after five years. Find out the PV of the bond on 31st December 2006.

Solution

Calculation of PV of 7% Bond using Single Discounting Rate

Year

Cash Flow (in Rs.)

PV (in Rs.)

2007

       7

   6.60

2008

      7

   6.23

2009

     7

   5.88

2010

     7

   5.54

2011

107

  79.96

 

Present Value =

104.21                              

Posted Date: 9/10/2012 5:37:38 AM | Location : United States







Related Discussions:- How to calculate present value?, Assignment Help, Ask Question on How to calculate present value?, Get Answer, Expert's Help, How to calculate present value? Discussions

Write discussion on How to calculate present value?
Your posts are moderated
Related Questions
Why would an analyst use the Modified Du Pont system to calculate ROE when ROE may be calculated more simply? Explain. In fact, an analyst wouldn't use the Modified Du Pont eq

Explain the Competitive Benchmarking Healthcare services or Hospital are compared to rival 'competition 'in the same industry for instance methods of patient care and levels o

1. If Robinson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain. 2. Construct Robinson’s market va

You have been to carry out the following work: To provide a financial analysis and interpretation of one London stock Exchange registered company. The senior Partner has

Profit Maximisation Decision Criterion According to this approach, actions which increase profits must be undertaken and those that decrease profits are to be avoided. In speci

What are the primary reasons that companies hold cash? Companies hold cash to do necessary payments to take advantage of opportunities as they arise and to cover unforeseen eme

Hedge funds are short two types of funding options. Describe in detail what these options are.   Describe why these options become more valuable during a financial crisis.   During

How are foreign exchange transactions between international banks settled? Answer:  a network of correspondent banking relationships is known as the interbank market with large c

Debit Credit Accounts receivable $300,000 Allowance for doubtful accounts $35,000 Sales for 2010 were $5,500,000. All sales were sales on account. At the end of each month

As an investor, what factors would you consider before investing in the emerging stock market of a developing country? Answer:  An investor in emerging market stocks requirements