BOND PRICING. Find PBOND for each of the following $1000 par value bonds. Use a calculator to find the correct answers. Round to the nearest penny ($0.01). Example: 12% coupon (APR, compounded annually), matures in one year, r=12% 5. 12%APR 12% = 0.12 First, convert the coupon rate from APR to periodic rate: lyear уear Second, find the соиpon: Coupon - (СоuponRate)(Face) - (0.12)(1000) — 120 - С %3D (lyr)lyrs |= 1yr = T yr Third, find the relevant number of periods: Fourth, use bond pricing formula with the appropriate discount rate (here, 12%): T 1000 + 120 1000 C F 120 1120 PBOND = 1000 %3D (1 + r)' )' (1+r)" | (1.12)' (1.12)' 1.12 1.12 1.12 \t=1 12% coupon (APR, compounded quarterly), matures in one year, r=4% per quarter [Here, the discount rate is ready to use, while the coupon rate is still in its marketing-gimmick form.] b. а. 12% coupon (APR, compounded semi-annually), matures in two years, r=6% per 6 months
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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