Labadi Inc issues a bond that has a stated interest rate of 10%, face amount of $100,000, and is due in 5 years. Interest payments are made semi-annually. The market rate for this type of bond is 12%. What is the issue price of the bond? Round your answer to the nearest amount. Question 28 options: $83,920 $53,603 $100,000 $92,639
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:
Labadi Inc issues a bond that has a stated interest rate of 10%, face amount of $100,000, and is due in 5 years. Interest payments are made semi-annually. The market rate for this type of bond is 12%. What is the issue price of the bond? Round your answer to the nearest amount.
Question 28 options:
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$83,920 |
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$53,603 |
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$100,000 |
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$92,639 |
Number of periods = 5 years*2
Number of periods = 10
Coupon rate = 10%/2
Coupon rate = 5%
Market rate = 12%/2
Market rate = 6%
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