(a) If the bond has FOUR years remaining until maturity, calculate the value of the bond today. (6%) (b) Now assume that the discount rate changes for the THIRD year and the FOURTH year to be 9%, calculate the value of the bond today. (8%)

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A: Bond are debt instruments issued by a company. They usually pay fixed coupon rates through the life…

Q: For a one year bond of $2,600 at a simple interest rate of 11% per year, find the semiannual…

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Q: Consider a bond with a principal of $1,000 that pays a coupon of $100 per year. If the bond matures…

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Q: calculate the present value

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A: Bond price today = Bond price 3 years from now / (1 + Interest rate)^Time

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Q: Assume that interest rate on a 182-day, $1 million face value, T-Bill is currently selling at a…

A: The below expression can be used to calculate the current price of T-bill:

Q: According to the expectations theory of the term structure of interest, if the 1-year bond rate…

A: Expectation theory of the term of interest structure refers to the expectation of investors to earn…

Q: The three-year interest rate is 7.40% and the four-year interest rate is 8.6%. The liquidity premium…

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A:

Q: Use the following tables to calculate the present value of a $130,000, 5%, 6-year bond that pays…

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Q: Suppose a U.S. government bond pays $2,155.40 in 5 years at 6% interest. Calculate the present value…

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A: Present value = Amount to be received annually X Present value of annuity of $ 1 at 3% for 8 years

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: