John issued $5 million of 10% bonds. At the time John issued the bonds, market rate of interest was 11%. Which of the following statement is correct? A. Bonds were issued at a premium. B. Annual interest expense will exceed the company's actual cash payments for interest. C. The carrying value of the bond will decrease as the bond matures D. Annual interest expense will be $500,000
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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