Bond A has the following terms: (Use semi- annual interest payments if applicable.) Coupon rate of interest: 10 percent Principle: $1,000 Term to maturity: 8 years Bond B has the following terms: (Use semi- annual interest payments if applicable.) Coupon rate of interest: 5 percent Principle: $1,000 Term to maturity: 8 years What should be the price of each bond if interest rates are 10 percent? What will be the price of each bond if, after five years have elapsed, interest rates are 10 percent? What will be the price of each bond if, after eight years have elapsed, interest rates are 8 percent?
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:
Bond A has the following terms: (Use semi- annual interest payments if applicable.)
- Coupon rate of interest: 10 percent
- Principle: $1,000
- Term to maturity: 8 years
Bond B has the following terms: (Use semi- annual interest payments if applicable.)
- Coupon rate of interest: 5 percent
- Principle: $1,000
- Term to maturity: 8 years
- What should be the price of each bond if interest rates are 10 percent?
- What will be the price of each bond if, after five years have elapsed, interest rates are 10 percent?
- What will be the price of each bond if, after eight years have elapsed, interest rates are 8 percent?
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