The annual coupon rate on a 12-year bond is 9%. If the bond matures, the coupon rate would be set. The bond has a 7 percent yield to maturity. Which of the comments below is the most accurate? a. The bond is now being sold for less than its face value. b. If market interest rates fall today, the bond's price would therefore fall today. c. If market interest rates are stable for the next year, the bond's price would be lower than it is currently. d. Both of the above claims are true. e. None of the above claims are true.
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:
The annual coupon rate on a 12-year bond is 9%. If the bond matures, the coupon rate would be set. The bond has a 7 percent yield to maturity. Which of the comments below is the most accurate?
a. The bond is now being sold for less than its face value.
b. If market interest rates fall today, the
c. If market interest rates are stable for the next year, the bond's price would be lower than it is currently.
d. Both of the above claims are true.
e. None of the above claims are true.
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