Use a 10% Coupon bond with semiannual payments and a 20 year maturity. 1000 par. After five years the issuing firm of the coupon bond is in financial distress, if the coupons are guaranteed but the principal payment is expected to only have 20% of it paid back. If investors expect a 10% expected yield to maturity, at what price will this bond sell at time 5 years?
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:
Use a 10% Coupon bond with semiannual payments and a 20 year maturity. 1000 par.
After five years the issuing firm of the coupon bond is in financial distress, if the coupons are guaranteed but the principal payment is expected to only have 20% of it paid back. If investors expect a 10% expected yield to maturity, at what price will this bond sell at time 5 years?
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