Dunbar Corporation has $1,000 par value bonds on the market with 12 years remaining to maturity. The bonds are selling for $1,226.09, which provides buyers an 8 percent YTM. The bonds make annual coupon payments. What must the coupon interest rate be on Dunbar’s bonds? Draw the appropriate CF diagram and then complete the calculation.
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 Coupon Problem) Dunbar Corporation has $1,000 par
Step by step, as if writing it on a sheet of paper.
Bond is the fixed income security which promises the holder with future coupon payment.
formula:
where,
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