On Jan 1st 2019 Joe purchased a newly issued one-year government bond with a principal of $1,000 and an annual coupon rate of 5 percent. If the prevailing market interest rate falls to 2 percent per annum on Jan 2nd 2019, what is the expected market price of the bond? Select one: O a. $900 O b. $1,000 O c. $980 O d. $1,029 O e. $1,020
On Jan 1st 2019 Joe purchased a newly issued one-year government bond with a principal of $1,000 and an annual coupon rate of 5 percent. If the prevailing market interest rate falls to 2 percent per annum on Jan 2nd 2019, what is the expected market price of the bond? Select one: O a. $900 O b. $1,000 O c. $980 O d. $1,029 O e. $1,020
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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:
Question
Transcribed Image Text:On Jan 1st 2019 Joe purchased a newly issued one-year government bond with a principal of $1,000 and an annual coupon rate of 5
percent. If the prevailing market interest rate falls to 2 percent per annum on Jan 2nd 2019, what is the expected market price of the
bond?
Select one:
O a. $900
O b. $1,000
O c. $980
O d. $1,029
O e. $1,020
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