The following table shows bonds which pay interest annually. Calculate the Yield to Maturity (YTM) for each bond. Bond Par Value Coupon Rate Years to maturity Current Value A 1,000 9% 8 $820 B 1,000 12 16 1000 C 500 12 12 560 D 1000 15 10 1,120 E 1000 5 3 900
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:
1. The following table shows bonds which pay interest annually. Calculate the Yield to
Maturity (YTM) for each bond.
Bond Par
Value
Coupon
Rate
Years to
maturity
Current Value
A 1,000 9% 8 $820
B 1,000 12 16 1000
C 500 12 12 560
D 1000 15 10 1,120
E 1000 5 3 900
1. Calculate the
interest rate of 10% (5% paid semi-annually) if the required return on similar-risk bonds is
14% annual interest (7% paid semi-annually)
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