Ajanta Company bonds will mature after 5 years and they are selling at 80.175% of their face value. The bonds pay interest annually. The required rate of return by the bondholders is 12%. Find the coupon rate of these bonds.
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:
. Ajanta Company bonds will mature after 5 years and they are selling at 80.175% of their face
value. The bonds pay interest annually. The required
the coupon rate of these bonds.
An increase in a bond’s YTM results in a smaller price change than a decrease in yield of equal
magnitude. Elaborate the mentioned property of bond using diagrammatic representation.
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