A bond a has a par value of P100, a coupon rate of 10.75% and matures in 5 years. If interest is paid annually and the required rate of return is 10%, what is the bond's value by general constant rate formula?
A bond a has a par value of P100, a coupon rate of 10.75% and matures in 5 years. If interest is paid annually and the required rate of return is 10%, what is the bond's value by general constant rate formula?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 4MC
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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
![4. A bond a has a par value of P100, a coupon rate of 10.75% and
matures in 5 years. If interest is paid annually and the required rate
of return is 10%, what is the bond's value by general constant rate
formula?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffd644ef1-0ef8-4b8b-b65d-c623df9b5a9f%2Ffc807935-61de-4351-90dd-96dac8817698%2Feng35m6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:4. A bond a has a par value of P100, a coupon rate of 10.75% and
matures in 5 years. If interest is paid annually and the required rate
of return is 10%, what is the bond's value by general constant rate
formula?
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