1. Bonds Valuation
Team DJS
Dan DeWees
Samuel Djahanbani
Justin Widjaja

2. 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?

3. 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.

4. 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”

5. 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