Documente Academic
Documente Profesional
Documente Cultură
and Risks
Corporate Finance
Session 7/8
PGP 2018-20
Kushankur Dey
Faculty, Finance & Accounting, IIM BG
Session plan (7/8)
• Key features of bonds
• Bond valuation
• Measuring yield
– Yield to maturity
• Assessing risks
– Default risk
– Market risk/interest rate risk
Weighted average
cost of capital
(WACC)
0 1 2 10
10% ...
V=? 100 100 100 + 1,000
PV annuity = 614.46
PV maturity value = 385.54
Value of bond INR=1,000.00
INPUTS
10 10 100 1000
N I/YR PV PMT FV
OUTPUT -1,000
INPUTS
10 13 100 1000
N I/YR PV PMT FV
OUTPUT -837.21
INPUTS
10 7 100 1000
N I/YR PV PMT FV
OUTPUT -1,210.71