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:
You are given the following concerning a non-callable, sinking fund debenture bond (refer to image).
a.) If you buy the bond today at its face amount and interest rates rise to 12 percent after five years have passed, what is your
b.) What is the bond's current yield after five years?
c.) Given your price in A, what is the current yield to maturity?
d.) Is there any reason to believe that the bond will be called after five years have elapsed if interest rates decline?
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