A Macrohard Corp. bond carries an 10% coupon, paid annually and has 10 years to maturity. The par value is $1000 and the required rate of return is 5%. a) Calculate the price of the bond today (P0) b) Is this a discount or premium bond? Explain? c) Calculate the price of the bond one year from now (P1) d) If you buy the bond today and sell it one year from now, calculate i) Current yield ii) Capital gains yield iii) Total rate of return (yield)
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 Macrohard Corp. bond carries an 10% coupon, paid annually and has 10 years to maturity. The par value is $1000 and the required
a) Calculate the price of the bond today (P0)
b) Is this a discount or premium bond? Explain?
c) Calculate the price of the bond one year from now (P1)
d) If you buy the bond today and sell it one year from now, calculate
i) Current yield
ii)
iii) Total rate of return (yield)
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