29. Which of the following has the greatest interest rate (price) risk? a. A 10-year, $1,000 face value, 10 percent coupon bond with semiannual interest payments. b. A 10-year, $1,000 face value, 10 percent coupon bond with annual interest payments. c. A 10-year, $1,000 face value, zero coupon bond. d. A 10-year $100 annuity. e. All of the above have the same price risk since they all mature in 10 years.
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:
29. Which of the following has the greatest interest rate (price) risk?
a. A 10-year, $1,000 face value, 10 percent coupon bond with semiannual
interest payments.
b. A 10-year, $1,000 face value, 10 percent coupon bond with annual
interest payments.
c. A 10-year, $1,000 face
d. A 10-year $100 annuity.
e. All of the above have the same price risk since they all mature in 10
years.
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