A zero coupon bond pays no interest—only its face value of $1000 at maturity. One such bond has a maturity of 18 years and an initial price of $130. What annual interest rate is earned if the bond is bought when issued and held to maturity?
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 zero coupon bond pays no interest—only its face value of $1000 at maturity. One such bond has a maturity of 18 years and an initial price of $130. What annual interest rate is earned if the bond is bought when issued and held to maturity?
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