Travis Wenzel has $2000 to invest. Usually he would deposit the money in his savings account, which earns 6% interest compounded monthly. However, he is considering three alternative investment opportunities: • Option 1. Purchasing a bond for $2000. The bond has a face value of $2000 and pays $100 every six months for three years, after which time the bond matures. • Option 2. Buying and holding a stock that grows 11 % per year for three years. Option 3. Making a personal loan of $2000 to a friend and receiving $150 per year for three years. Determine the equivalent annual cash flows for each option and select the best option.

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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: