1. You borrow $1,500 and sign a contract that you will pay 1.6% interest rate. The inflation rate over the year ends up at 1.8%. This means that you real interest rate ends up being. 2. How much are you willing to pay for a bond with $1,000 face value and a 3% coupon rate with 2 years left to maturity? The current market interest rate on bonds with similar risk is 3%. The coupon payments are annual.
1. You borrow $1,500 and sign a contract that you will pay 1.6% interest rate. The inflation rate over the year ends up at 1.8%. This means that you real interest rate ends up being. 2. How much are you willing to pay for a bond with $1,000 face value and a 3% coupon rate with 2 years left to maturity? The current market interest rate on bonds with similar risk is 3%. The coupon payments are annual.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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:
Question
1. You borrow $1,500 and sign a contract that you will pay 1.6% interest rate. The inflation rate over the year ends up at 1.8%. This means that you real interest rate ends up being.
2. How much are you willing to pay for a bond with $1,000 face value and a 3% coupon rate with 2 years left to maturity? The current market interest rate on bonds with similar risk is 3%. The coupon payments are annual.
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