Consider a bond with a face value of $1,000. The coupon is paid semiannually and the market interest rate (effective annual interest rate) is 8 percent. How much would you pay for the bond if a. the coupon rate is 6 percent and the remaining time to maturity is 10 years? b. the coupon rate is 10 percent and the remaining time to maturity is 15 years?
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:
Consider a bond with a face value of $1,000. The coupon is paid semiannually and the market
interest rate (effective annual interest rate) is 8 percent. How much would you pay for the bond
if
a. the coupon rate is 6 percent and the remaining time to maturity is 10 years?
b. the coupon rate is 10 percent and the remaining time to maturity is 15 years?
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