You are considering a 10-year, $1,000 par value bond. Its couponrate is 8%, and interest is paid semiannually. If you require an “effective” annual interestrate (not a nominal rate) of 7.1225%, how much should you be willing to pay forthe bond?
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 considering a 10-year, $1,000 par
rate is 8%, and interest is paid semiannually. If you require an “effective” annual interest
rate (not a nominal rate) of 7.1225%, how much should you be willing to pay for
the bond?
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