Bradford inc. has a coupon bond that has a 10% coupon rate. The bond has a par value of $1000 and is expecting to mature in 10 years. If the YTM is 4%, what is the value of this bond? Is your bond selling at a discount or at a premium?

Bradford inc. has a coupon bond that has a 10% coupon rate. The bond has a par value of $1000 and is expecting to mature in 10 years. If the YTM is 4%, what is the value of this bond? Is your bond selling at a discount or at a premium?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 8P

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Concept explainers

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:

Question

COUPON BOND
1. Bradford inc. has a coupon bond that has a 10% coupon rate. The bond has a par value of $1000 and is expecting to mature in 10 years. If the YTM is 4%, what is the value of this bond? Is your bond selling at a discount or at a premium?

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