Calculate the purchase price of the following bonds. Indicate whether the bonds are priced at a discount, at par or at a premium. Give your answers in dollars and cents to the nearest cent. Face Value Coupon Rate Years to Maturity Market Rate a) $100 r = 6.75% 5 j2 = 6.75% b) $1,000 r = 8% 11 j2 = 6.25% c) $10,000 r = 7% 20 j2 = 8.75% Quoted coupon rates and market rates are nominal annual rates compounded semi-annually. a)Price = $ This bond is priced at: a discount par a premium b)Price = $ This bond is priced at: a discount par a premium c)Price = $ This bond is priced at: a discount par a premium
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:
Calculate the purchase price of the following bonds. Indicate whether the
| Face Value | Coupon Rate | Years to Maturity | Market Rate | |
|---|---|---|---|---|
| a) | $100 | r = 6.75% | 5 | j2 = 6.75% |
| b) | $1,000 | r = 8% | 11 | j2 = 6.25% |
| c) | $10,000 | r = 7% | 20 | j2 = 8.75% |
Quoted coupon rates and market rates are nominal annual rates compounded semi-annually.
a)Price = $
This bond is priced at:
a discount
par
a premium
b)Price = $
This bond is priced at:
a discount
par
a premium
c)Price = $
This bond is priced at:
a discount
par
a premium
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
