12. An OMR 100 bond with two years to maturity and an annual coupon of 9 per cent is available. (The next coupon is payable in one year.)
12. An OMR 100 bond with two years to maturity and an annual coupon of 9 per cent is available. (The next coupon is payable in one year.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
![12. An OMR 100 bond with two years to maturity and an
annual coupon of 9 per cent is available. (The next
coupon is payable in one year.)
a. If the market requires a yield to maturity of 9 per cent
for a bond of this risk class what will be its market
price? (1.5 marks)
b. If the required yield to maturity on this type of bond
changes to 10 per cent, what will the market price
change to? (1.5 marks)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8e96cbdc-4d87-4056-a18e-91cc5d0058af%2F6dbaf2f1-82d8-4f33-88f9-21e444e52c50%2Fzw6uu5c_processed.jpeg&w=3840&q=75)
Transcribed Image Text:12. An OMR 100 bond with two years to maturity and an
annual coupon of 9 per cent is available. (The next
coupon is payable in one year.)
a. If the market requires a yield to maturity of 9 per cent
for a bond of this risk class what will be its market
price? (1.5 marks)
b. If the required yield to maturity on this type of bond
changes to 10 per cent, what will the market price
change to? (1.5 marks)
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