The bonds of CEPS Group sells for OMR 896.67. The yield to maturity is 11 percent and the maturity date is 10 years from today. What is the annual coupon rate of this bond if the face value is $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:
4. The bonds of CEPS Group sells for OMR 896.67. The yield to maturity is 11 percent and the
maturity date is 10 years from today. What is the annual coupon rate of this bond if the face
value is $1,000?
Bond pays coupon to the bond holder at its coupon rate. Bond’s value is the present value of the all future cash flows from the bond.
It is required to find the coupon payment to know what the coupon rate is.
Using the price of the bond equation, coupon payment can be calculated:
Where,
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