A clarification for anyone interested on how the SPS trust got...

A clarification for anyone interested on how the SPS trust got to their ~$34 per security:

They assume distributions at the step-up margin start in june and go into perpetuity (forever) and the instruments are never redeemed. They then take each of these interest payments and discount it at a rather heavy rate of 27.5%.

You can try the valuation exercise yourself in Microsoft Excel using the formula below:

=PV(27.5%/2,100,-9.15/2,0)

(You will get about $33.27 using 27.5%)

First ask yourself: what % annual return would I require to invest in PXUPA given my risk tolerance, and then replace the 27.5% in the formula with your number. The higher your discount rate, the lower the value. The formula will spit out what you should (ostensibly) be willing to pay today *if* they started paying distributions in June (at a 4.5% BBSW + 4.65% step-up) and they continued paying in perpetuity.

Of course, if there is no coupon and no redemption, it doesn't matter what your discount rate is, the formula will calculate a value of zero.

:)

Xavier