The following information pertains to a bond issue of the VWX Corporation: Maturity value: $1,000,000 Maturity date: December 31, 2022 Stated interest rate (Coupon rate): 5.75% Interest payments are made annually on December 31st Date of issue: January 1, 2015 Effective (market) interest rate (Yield to maturity) at issue: 6.8% On December 31, 2020, when the market interest rate (=the yield to maturity) of the bond was 4.2%, VWX de-recognized entire bond by paying the market value + $12,000. The market value(price) of the bond on December 31, 2020 was $______. (Do not include $12,000.) Determine the amount of the gain or loss on the bond de-recognition. Assume the coupon was paid before the bond de-recognition, and the bond was completely repurchased on 12/31/2020. (If it is a loss, express the amount by a negative number using – sign in front of the amount, such as -123.) $______.
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 following information pertains to a bond issue of the VWX Corporation:
Maturity value: $1,000,000
Maturity date: December 31, 2022
Stated interest rate (Coupon rate): 5.75%
Interest payments are made annually on December 31st
Date of issue: January 1, 2015
Effective (market) interest rate (Yield to maturity) at issue: 6.8%
On December 31, 2020, when the market interest rate (=the yield to maturity) of the bond was 4.2%, VWX de-recognized entire bond by paying the market value + $12,000.
The market value(price) of the bond on December 31, 2020 was $______. (Do not include $12,000.)
Determine the amount of the gain or loss on the bond de-recognition. Assume the coupon was paid before the bond de-recognition, and the bond was completely repurchased on 12/31/2020.
(If it is a loss, express the amount by a negative number using – sign in front of the amount, such as -123.)
$______.
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