Q No. 1: ABC Private Limited is a growing organization in the industry and is showing progress in terms of capturing new markets in the industry. ABC have observed the interest rate increases from 10% to 12% suddenly. Find the present values of the two bonds given below both before and after the change.Both the bonds have same coupon rate of 11%. a) Bond 1 has a maturity of 5 years and bond 2 has a maturity of 15 years.
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:
Q No. 1: ABC Private Limited is a growing organization in the industry and is showing progress in terms of capturing new markets in the industry. ABC have observed the interest rate increases from 10% to 12% suddenly. Find the present values of the two bonds given below both before and after the change.Both the bonds have same coupon rate of 11%.
a) Bond 1 has a maturity of 5 years and bond 2 has a maturity of 15 years.
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