A bond has a maturity value of $ 3000 and is paying discrete compound interest at an effective annual rate of 3 percent. Determine the following at a time four years before the bond reaches maturity value. 1- Discount. 2- Discrete compound rate of effective interest which will be received by a purchaser if the bond were obtained for $ 2200 3. Present worth for the case where the effective annual bond interest is 5 percent compounded continuously
A bond has a maturity value of $ 3000 and is paying discrete compound interest at an effective annual rate of 3 percent. Determine the following at a time four years before the bond reaches maturity value. 1- Discount. 2- Discrete compound rate of effective interest which will be received by a purchaser if the bond were obtained for $ 2200 3. Present worth for the case where the effective annual bond interest is 5 percent compounded continuously
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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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 maturity value of $ 3000 and is paying discrete compound interest at an effective annual
rate of 3 percent. Determine the following at a time four years before the bond reaches maturity value.
1- Discount.
2- Discrete compound rate of effective interest which will be received by a purchaser if the bond were
obtained for $ 2200
3. Present worth for the case where the effective annual bond interest is 5 percent compounded
continuously
Transcribed Image Text:A bond has a maturity value of $ 3000 and is paying discrete compound interest at an effective annual
rate of 3 percent. Determine the following at a time four years before the bond reaches maturity value.
1- Discount.
2- Discrete compound rate of effective interest which wvill be received by a purchaser if the bond were
obtained for $ 2200.
3- Present worth for the case where the effective annual bond interest is 5 percent compounded
continuously
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