A $5,500 bond had a coupon rate of 4.75% with interest paid semi-annually. Sarah purchased this bond when there were 8 years left to maturity and when the market interest rate was 5.00% compounded semi-annually. He held the bond for 4 years, then sold it when the market interest rate was 4.50% compounded semi-annually. a. What was the purchase price of the bond? Round to the nearest cent. b. What was the selling price of the bond? Round to the nearest cent. c. What was Sarah's gain or loss on this investment? (click to select)GainLoss amount was $
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 $5,500 bond had a coupon rate of 4.75% with interest paid semi-annually. Sarah purchased this bond when there were 8 years left to maturity and when the market interest rate was 5.00% compounded semi-annually. He held the bond for 4 years, then sold it when the market interest rate was 4.50% compounded semi-annually.
a. What was the purchase price of the bond?
Round to the nearest cent.
b. What was the selling price of the bond?
Round to the nearest cent.
c. What was Sarah's gain or loss on this investment?
(click to select)GainLoss
amount was $
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
