Assume that a corporate bond has a par value of P1,000 and 8 years until it matures. This bond also has an annual coupon rate of 7.5%, but pays interest every 6 months. If investors require an annual nominal rate of return of 8.6% (compounded semi-annually), then what should be the current price for this bond? *
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:
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