A $1,000 bond has a 7.5 percent coupon and mature after ten years. If a current interest rates are 10 percent, what should be the price of the bond? b. if after six years interest rates are still 10 percent, what should be the price of the bond? c. Even though interest rates did not change in a and b, why did the price of the bond change? d. Change the interest rate in a and b to 6 percent and rework your answer. Even though the interest rate is 6 percent in both calculation, why are the bond prices different?
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
A $1,000 bond has a 7.5 percent coupon and mature after ten years.
If a current interest rates are 10 percent, what should be the price of the bond?
b. if after six years interest rates are still 10 percent, what should be the price of the bond?
c. Even though interest rates did not change in a and b, why did the price of the bond change?
d. Change the interest rate in a and b to 6 percent and rework your answer. Even though the interest rate is 6 percent in both calculation, why are the
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