The 15 year, $1,000 par value bonds of Waco industries pay 9 percent interest annually. The market price of the bond is $935, and the market’s required yield to maturity on a comparable-risk bond is 11 percent. a. Compute the bond’s yield to maturity. b. Determine the value of the bond to you given the market’s required yield to maturity on a comparable-risk bond. c. Should you purchase the bond
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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The 15 year, $1,000 par value bonds of Waco industries pay 9 percent interest annually. The market price of the bond is $935, and the market’s required yield to maturity on a comparable-risk bond is 11 percent.
a. Compute the bond’s yield to maturity.
b. Determine the value of the bond to you given the market’s required yield to maturity on a comparable-risk bond.
c. Should you purchase the bond?
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a. What is your yield to maturity on the Waco bonds given the current market price of the bonds? ____ % (Round to two decimal places) Sent from my iPhone
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