An investor buys a five-year, 7.5% annual coupon bond priced to yield 5%. The investor plans to sell the bond in two years once the second coupon payment is received. a. Calculate the purchase price of the bond. b. Calculate the horizon yield assuming that the coupon reinvestment rate after the bond purchase and the YTM at the time of sale at 3.00%
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:
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