Suppose that all investors expect that interest rates for the 4 years will be as follows: Year 0 4% (today) Year 1 5% Year 2 6% Year 3 7% What is the price of a 2-year maturity bond with a 10% coupon rate paid annually? (Par value =1,000).
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:
Suppose that all investors expect that interest rates for the 4 years will be as follows:
Year 0 4% (today)
Year 1 5%
Year 2 6%
Year 3 7%
What is the price of a 2-year maturity bond with a 10% coupon rate paid annually? (Par value =1,000).
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