BBK 1000,7% 2 years were corporate bonds floated by Barclays bank of Kenya. The bonds were sold at a discount of Ksh 950. Assume that the prevailing rates of interest were 9%. Required: (a) Compute the yield to maturity (b) Determine the value of the bond at the point of purchase (c) Explain the concept of bond stripping.
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:
BBK 1000,7% 2 years were corporate bonds floated by Barclays bank of Kenya. The bonds were sold at a discount of Ksh 950. Assume that the prevailing rates of interest were 9%.
Required:
(a) Compute the yield to maturity
(b) Determine the
(c) Explain the concept of bond stripping.
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