Sfm bond valuation - perpetual bond

Tushar999 (ICAI) (26 Points)

16 April 2015  

Hello Respected Members,

I am finding it difficult to solve a question relating to Perpetual Bond.

I tried looking for the solution but could not find any. I am getting value of the bond but have problem finding YTM.

I would be glad if anyone could provide me a solution for the question.

Q.) A Rs. 100 perpetual bond is currently selling for Rs. 95. The coupon rate of interest is 14.5 % and the discount rate is 16 %. Calculate the value of the Bond. Should it be bought? What is its Yield to Maturity?

Thanks.