1. Valuation of bonds and share
Book value
Liquidation value
Going concern value
Market value

2. Features of bonds and debentures
Face value
Interest Rate
Maturity
Redemption value
Market value

3. Practical example Bonds with maturity
Valuation of bonds when principle amount is amortized every year
Bonds value and semi annually interest rate payment
Pure discount bonds
Perpetual bonds

4. Perpetual bonds Discount Rate( %) Value of Bonds (Rs.) 5 2000 10 100015
667 20
500 25
400 30
333

5. Perpetual bonds value and interest rate

6. Bonds maturity and interest rate risk
Present value(Rs.)
Discount rate (%)
5 year bond
10 year bond
Perpetual bond 5
1216
1386
2000 10
1000 15
832
749
667 20
701
581
500 25
597
464
400 30
513
382
333
Fv=1000 Rs, Rate Of Interest =10%, Maturity Value =1000Rs.

7. Bonds maturity and interest rate risk

8. Bonds maturity and interest rate risk
The intensity of interest rate risk would be higher on bonds with long maturities than bonds with short maturity.
Longer maturity period is exposed to grater degree of risk from the increasing interest rate.
Practical example of bond duration and interest rate sensitivity

9. Structure of Interest rate
1. Expectation Theory
2.Liquidity premium Theory
3. The expected market Theory
Default risk and credit rating agency:
CRISIL
ICRA
CARE

10. CRISIL Debenture Rating
AAA: Highest safety
AA: High safety
A: Adequate safety
BBB: moderate safety
BB: Inadequate safety
B: High risk
C: Substantial Risk
D: Default

11. Valuation of preference shares
Claims
Dividend
Redemption
conversion