Bond Valuation and Market Price Analysis

This corporate finance assignment examines the bond pricing of Shell Corporation on June 12, 2018. It calculates the bond's market price using provided information about face value, coupon rate, yield rate, and interest rates. The analysis also explores why the bond's market price is below par, attributing it to the difference between coupon payment rate and prevailing interest rates. The assignment delves into how changes in interest rates impact bond valuations and the relationship between coupon payments and investor returns.

Running head: CORPORATE FINANCE ASSIGNMENT
Corporate Finance Assignment
Name of the Student:
Name of the University:
Authors Note:

CORPORATE FINANCE ASSIGNMENT
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Table of Contents
2d.i) Identifying the bond price of Shell corporation in 6/12/2018:..........................................2
2d.ii) Identifying the bond price difference with the values in figure and commenting on the
why it is below par level:...........................................................................................................2

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2d.i) Identifying the bond price of Shell corporation in 6/12/2018:
Particulars Value
Face Value $ 100
Coupon Rate p.a. 2.25%
Half Year Coupon Rate 2.25% / 2
Half Year Coupon Rate 1.13%
Coupon Payment 100 * 1.13%
Coupon Payment 1.13
Yield Rate 2.62%
Half Yearly Yield Rate 2.62% / 2
Half Yearly Yield Rate 1.31%
Total Period 6
No. of Coupon Payments 6 * 2
No. of Coupon Payments 12
Market Price of Bond 1.13% * 100*(((1 - ((1 + 1.31%)-12)) / 1.31%)) + (((100 / ((1 + 1.31%)12))))
Market Price of Bond $ 97.96
2d.ii) Identifying the bond price difference with the values in figure and commenting on
the why it is below par level:
The evaluation of above table mainly helps in identifying the market value of bond, which is
relatively at par from its actual value. In addition, the overall market price of bond is mainly
at $97.96, which is relatively lower than the values portrayed in the figure. This is mainly due
to the changes in interest rates, which significant effects prices of bonds. The difference in
coupon payment rate and interest rate is relatively an adequate factor, which directly affect

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prices of bonds and allows the investors to detect its market value. In this context, some
researchers stated that increment in interest rates directly reduces actual prices of bonds, as it
affects time value of money which is been invested in Bond. The coupon payment rates are
mainly a subsidiary for the rising interest rates, as it helps in creating bond value among
potential customers. On the other hand, some of the researchers argued that valuation of bond
prices substantially reduces when organization does not pay coupon payments to their
shareholders.
The difference in coupon rate 2.25% with interest rate 2.62% Is mainly the reason
behind change in actual market price of the bond from its par value. The increment in interest
rate by 0.37% is mainly hampering valuation of the bond, as investors are receiving lower
returns from bond investment, as compared to interest returns provided in the current market.
This difference in return is directly affecting Bond valuation of Shell Corporation.