uppose that 6 months after you purchase the bond, the market rate for interest on this type of bond falls to 7.00%. This will cause the (coupon / market price / par value) to (fall / rise). From the issuer’s perspective, the lower interest rate means that he or she would be (worse / better) off issuing new bonds at this lower rate than continuing to pay you 9%.
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:
PICK ONE: Explain why
YOU: Suppose that 6 months after you purchase the bond, the market rate for interest on this type of bond falls to 7.00%. This will cause the (coupon / market price / par value) to (fall / rise). From the issuer’s perspective, the lower interest rate means that he or she would be (worse / better) off issuing new bonds at this lower rate than continuing to pay you 9%.
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