The interest rate on a one-year treasury discount bond is 5 percent. You expect a common stock to pay a dividend of $10 next year. You also expect the price of this stock next your to be $60. This stock is quite risky and, so, you require a risk premium of 20 percent to buy and hold it. If you are planning to hold this stock for only one year, you are willing to pay only ____________ for it.
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:
The interest rate on a one-year treasury discount bond is 5 percent. You expect a common stock to pay a dividend of $10 next year. You also expect the price of this stock next your to be $60. This stock is quite risky and, so, you require a risk premium of 20 percent to buy and hold it. If you are planning to hold this stock for only one year, you are willing to pay only ____________ for it.
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