A bond promises to pay the bondholder equal payments of P6,000 in six-month intervals for 30 years. If the face amount is P450,000, what is the fair price of the bond? Assume that the market rate is 2% compounded annually.
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:
A bond promises to pay the bondholder equal payments of P6,000 in six-month intervals for 30 years. If the face amount is P450,000, what is the fair price of the bond? Assume that the market rate is 2% compounded annually.
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