(a) If the bond has FOUR years remaining until maturity, calculate the value of the bond today. (6%) (b) Now assume that the discount rate changes for the THIRD year and the FOURTH year to be 9%, calculate the value of the bond today. (8%)

Q: Consider a one-year discount bond that has a present value of P1,500. If the rate of discount is 4…

A: Present value (PV) = P1500 Discount rate (r) = 4% Period (n) = 1 Year

Q: According to the expectations theory, what will be the interest rate on a three-year bond if the…

A: Expectations theory:- Based on current long-term interest rates, expectations theory tries to…

Q: What is the coupon rate of the bond if coupons are paid semiannually?

A: Coupon Rate: It refers to the annual income expected by the bondholder for investing in the…

Q: 1. Consider a bond that promises to pay $100 in one year. If its price today is $85, If the interest…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: ACT has an outstanding bond with a face value ( principal) of 1,000which would mature in 10 years.…

A: Current market value = present value of all future cash flows   Here FV = 1000; nper (or time…

Q: calculate the present value

A: Present value (PV) is nothing but the present value of all future cash inflows from a bond. And we…

Q: The interest rate on one-year Treasury bonds is 0.4 percent, the rate on two-year T-bonds is 0.8…

A: Bonds are a type of debt security that is issued by corporates or governments to collect funds.…

Q: A bond pays coupons annually, has a yield-to-maturity of 5%, and a duration of 6 years. What is this…

A: A financial instrument that doesn’t affect the ownership of the common shareholders or management of…

Q: What is the Macaulay duration of a 3% bond with 3 years to maturity, discounted at a rate of 2% per…

A: Macaulay duration shows the time period required by investor to recover his invested amount in the…

Q: A bond matures in 12 yesrs has a $1000 par value. The annual interest rate is 13 percent. The…

A: Time period of bond = 12 years Par value = $1000 Coupon Rate = 13% Yield to maturity = 14%

Q: A seven-year par value bond has a coupon rate of 10% (paid annually) what is a modified duration for…

A: A financial instrument that doesn’t affect the ownership of the common shareholders or management of…

Q: Use the following tables to calculate the present value of a $763,000, 6%, 6-year bond that pays…

A: Present Value of a Bond = Present Value of Coupon payments + Present Value of Redemption Value…

Q: A corporate bond has 18 years to maturity, a face value of $1,000, a coupon rate of 5.3% and pays…

A: Using excel PV function

Q: What is the present worth of a $10000 bond that has an interest of 20% per year payable…

A: The bond is fixed-income security issued by the company to raise funds. The present worth of a bond…

Q: A bond with 18 years to maturity has an annual interest payment of $30. If the bond sells for its…

A: Consider the face value be $1000 So, price of bond = $1000

Q: A 9-year bond has a yield of 10% and a duration of 7.194 years. If the market yield changes by 50…

A: Bond yield =10% Duration = 7.194 Market yield Change by = 50 basis point

Q: A bond pays a 6% coupon rate, face value 1000 dollars, discount rate - 4%, maturity ( number of…

A: Bonds are the liabilities of the company which is issued to raise the funds required to finance the…

Q: According to the expectations theory, what will be the interest rate on a three-year bond if the…

A: Interest rate of long term bonds are higher than short term bonds

Q: A bond matures in 25 years but is callable in 10 years at 120. The call premium decreases by 2…

A: given information  bond matures = 25 years callable in 10 years at 120 call premium decrease by 2%…

Q: Consider a bond with a duration of 8 years having a yield to maturity of 8 percent, and interest…

A: Percentage change in price of the bond= (-)duration* change in yield/( 1+ytm/2)

Q: The Wall Street journal reports that the current rate on 5-year treasury bonds is 2.85 percent and…

A: Computation:

Q: A seven-year government bond makes annual coupon payments of 5% and offers an interest rate (ie.…

A: Purchase price for a 7-year government bond with 5 percent annual coupon:…

Q: The one-year interest rates over the next three years are expected to be 5%, 4.5%, and 4%.…

A: Given Information: One-year interest rates = 5%, 4.5% and 4% Liquidity premium = 0%, 0.2% and 0.35%

Q: Assume that the one-year interest rates over the next four years are expected to be 7%, 8%, 9%, and…

A: Liquidity Premium Theory of Interest Rates: According to this theory investors prefer short-term…

Q: Calculate the price of the bond if the market interest rate falls from 4% to 3% per half-year. Com-…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: Crane Corp is issuing a 10-year bond with a coupon rate of 11 percent. The interest rate for similar…

A: Computation:

Q: Consider a one-year discount bond that has a present value of P1,500. If the rate of discount is 4…

A: Solution: Present value of bond = P1,500 Discount rate = 4% Period = 1 year

Q: Currently, a one-year Treasury bill is yielding 2.7 percent. Company F's three-year bond has a yield…

A: Maturity risk premium is the premium obtain by the investor due to holding of a particular security…

Q: Consider a one-year discount bond that has a present value of P1,500. If the rate of discount is 4…

A: Time value of money (TVM) is used to measure the value of money at different point of time in the…

Q: Assume that a bond makes 30 equal annual payments of \$1,000$1,000 starting one year from today.…

A: Using excel PV function

Q: You are provided the following information about a bond that was issued 7 years ago. The bond has a…

A: A bond is an instrument that represents the loan that is made by the investor to the company and…

Q: If the interest rates on all bonds rise from 5 to 10 percent over the course of the year and stay at…

A:

Q: A bond with 12 years to maturity has an annual interest payment of $65. If the bond sells for its…

A: Given information: Par value of bond is $1,000 Annual interest payment is $65 Number of years is 12

Q: As with most bonds, consider a bond with aface value of $1,000. The bond's maturity is 25 years, the…

A: In this question we require to calculate the bond's current yield. Current Yield = Annual Coupon /…

Q: you expect the inflation rate to be 15 percent next year and a one-year bond has a yied to maturity…

A: Real interest rate is nominal interest rate minus inflation. Nominal interest rate is interest rate…

Q: Assume that a bond will make payments every six months as shown on the following timeline (using…

A: We are provided with a bond here that makes semi-annual payments. Semi-annual payments means twice…

Q: According to the expectations theory, what will be the interest rate on a three-year bond if the…

A: Expectation theory helps to find an interest rate of long term bonds. are perfect substitutes. This…

Q: There is a callable 7% bond in 5 years at 106% of Par value. What is the price assuming it will be…

A: Callable: Formula:

Q: Assume that a bond will make payments every six months as shown on the following timeline (using…

A: Bond: The bond is a debt obligation under which the borrower of the debt is obliged to pay the…

Q: es over the next 3 years are expected to be 4%, 5% and 6%. If 3-year T-bonds are yielding 8%, what…

A: Liquidity premium = Current yield - Average expected interest rates

Q: A nine-year bond has a yield of 10% and a duration of 7.194 years. If the bond's yield to maturity…

A: Formula: Percentage change in price=-Duration×Percentage change in yield

Q: A bond has just been issued. The bond has an annual coupon rate of 7% and coupons are paid annually.…

A: Bonds are the debt security which is offered or issued by the corporates or government to collect…

Q: A bond makes an annual payment under 6% coupon rate. The bond is semiannual. It has 6 years before…

A: Calculate the coupon amount (PMT) by multiplying the face value of the bond which is $1,000 with the…

Q: Suppose you are deciding whether to buy a particular bond. If you buy the bond and hold it for 9…

A: Answer: Calculation of the present value of the payment of $8,981, if the interest rate is 4%:…

Q: Assume that a bond will make payments every six months as shown on the following timeline (using…

A: maturity of the bond is a time period that the bond will take to get its total matured value given…

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: