Bonds

Financial Analysis

TESCO

Bond

A bond is a type of financial certificate for which it pays interest, usually issued by private companies, the state (Central Bank, Public Enterprises, General Treasury of the Republic) and sometimes by a municipality, but not exclusively which aims to find new resources and fast. The bonds are unsecured instruments, but there is an implied warranty in government bonds, as always try to meet these commitments, it is for this reason that these bonds are more attractive. 

Terms of Issue

The terms of issue also includes: 

Date of issue and maturity of the bond

Amortization of principal and interest payments (calendar)

Applicable interest rate

Amount issued

Suppose we want to calculate the price to pay for a bond issued to three years, $ 10,000 par value, and coupon of 10 per 100 per year payable in two semiannual installments of $ 500. The desired performance is 14 per 100 per annum (simple annual rate) and the first coupon will be charged exactly six months.

As mentioned above, in the debt market bond contributions are always made in par 100. Therefore, the flow of funds from this bond is given by 6 semiannual coupon payments amounting to 5 (ie, $ 500: 10,000 x 0.05) plus the principal 100 (i.e. $ 10,000) to be received within six semesters today. The semiannual rate is 7 100 and the first coupon will be charged exactly six months. Applying the formula (1), the price to pay for this bond would be 90.46.

 

 

P =     5        +       5        +       5    +    5        +        5        +      105  

(1 +0.07) 1     (1 +0.07) 2     (1 +0.07) 3     (1 +0.07) 4      (1 +0.07) 5       (1 +0.07) 6

 

PP = 4.76 + 4.37 + 4.08 + 3.81 + 3.56 + 69.97 = 90.46

Choose another company, find a bond, list all pertinent information, and calculate today's price.

Wal-Mart

PP= $250[1-(1+0.06) ^ -20] + $5,000(1+0.06) ^ -20

0.06

PP = $2,867.50 +$1,559.02

PP (purchase price) = $4,426.52

The bonds of Tesco are better than the bond value of Wal Mart as at present its value is reachable by the customers. A bond is a financial instrument fixed income and is one of the forms of debt that can be used, both the government and private companies to finance themselves. It consists of coupons, which are the interest and principal value, both "fixed" from date of issue. Usually, the coupons are received every six months, sometimes annually, and principal are fully perceived the bond's maturity date.

Three variables characterize a bonus: their nominal value or par or principal ( par value ), the coupon ( coupon rate ) , and the due date ( maturity date ) . For example, a typical bond can have par value $ 10,000, 10 100 of annual interest and mature on December 31, 2012.

The nominal value is the amount the investor will receive the bond's maturity date, in Spain, for example, government bonds are generally issued with a par value of $ 10,000. The coupon is the percentage of par value that the investor will receive annually as interest charges. The bonus above $ 1,000 will pay annual interest (usually in two semiannual payments of $ ...