A 9% semiannual coupon bond matures in 6 years. The bond has a face value of $1,000 and a current yield of 8.9427%. What are the bond's price and YTM? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1) Do not round intermediate calculations. Round your answer for the bond's price to the nearest cent and for YTM to two decimal places. Bond's price: $ YTM: %
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:
Bond Price is computed by discounting coupon payments and the redemption value of the bond by yield rate.
Yield to Maturity computes the return rate if the bonds are held till maturity.
The market value of a bond is the price at which you could sell it to another investor before it matures. Expiration or maturity refers to the date when the bond is due in the future. The two components of the bond price are the present value of the coupon payments and the present value of the face value of the bond.
Given:
The coupon rate is 9%
The time period is 6 years
Face Value is $1,000
The current Yield is 8.927%
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