Complete the following by responding either premium or discount. If the market rate of interest is15% and the bond interest rate is 10%, the bonds will sell at a______________. If a bond’s interest rate is 10% and the market rate of interest is 8%, the bonds will sell at a_______________. In computing the carrying amount of a bond, unamortized _______________.is subtracted from the face value of the bond. In computing the carrying amount of a bond, unamortized________________ is added to the face value of the bond. 5.If a bond sells at__________________a, an amount in excess of the face value of the bond is received on the date of issuance. If a bond sells at a___________________, an amount less than the face value of the bond is received on the date of issuance.
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:
CP 10–1 Required: Complete the following by responding either premium or discount.
- If the market rate of interest is15% and the bond interest rate is 10%, the bonds will sell at a______________.
- If a bond’s interest rate is 10% and the market rate of interest is 8%, the bonds will sell at a_______________.
- In computing the carrying amount of a bond, unamortized _______________.is subtracted from the face
value of the bond . - In computing the carrying amount of a bond, unamortized________________ is added to the face value of the bond.
5.If a bond sells at__________________a, an amount in excess of the face value of the bond is received on the date of issuance.
- If a bond sells at a___________________, an amount less than the face value of the bond is received on the date of issuance.
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