A bond has a 10% coupon rate and a $100 face value. Coupon is paid every quarter, and the bond has 20 years to maturity. If investors require a 15% yield, what is the bond's value? a. The bond value is $143.06. b. The bond value is $70.50. c. The bond value is $69.80. d. The bond value is $68.42.

A bond has a 10% coupon rate and a $100 face value. Coupon is paid every quarter, and the bond has 20 years to maturity. If investors require a 15% yield, what is the bond's value? a. The bond value is $143.06. b. The bond value is $70.50. c. The bond value is $69.80. d. The bond value is $68.42.

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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Concept explainers

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

A bond has a 10% coupon rate and a $100 face
value. Coupon is paid every quarter, and the
bond has 20 years to maturity. If investors
require a 15% yield, what is the bond's value?
a. The bond value is $143.06.
b. The bond value is $70.50.
c. The bond value is $69.80.
d. The bond value is $68.42.

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