Bonds Valuation Team DJS Dan DeWees Samuel Djahanbani Justin Widjaja

Non interest-bearing bond Good investment? Non interest-bearing bond Interest-bearing bond When mature? When mature? At what coupon rate? How many? How many? Combine?

Method used 2-parts spread sheet: one for the non-interest bonds (Zi) and the other one for the coupon bonds (Bi). Non interest-bearing bonds (done before) Interest-bearing bonds: [3.1] Add interest per year (Face value * coupon rate) [3.2] Bond Maturity Income (includes both non interest- bearing bonds and interest-bearing bonds) [3.3] Add interest income (Bi * interest per year). As a bond matures, its interest income also ends at that year of maturity.

Method used(continued) 4) Total cost = Cost of Non interest- bearing bonds (Z) + Cost interest-bearing bonds (B) 5) Use solver to obtain the values of Zi and Bi that minimize the total cost [5.1] Set objective : “Total cost” [5.2] By changing variable cells : “Zi & Bi” [5.3] Subject to constraint : “Lower Bound <= Cash left <= Upper Bound”

Results Combine both non interest-bearing bonds and interest-bearing bonds. Minimum Total Cost = 17,827,191.01 Bond Coupon Rate Quantity Z10 0% 790 B1 10% 2,468 B5 6% 4,197 B8 3% 7,093 B12 4,330