Use the present value tables in Appendix B to calculate the issue price of a $300,000 bond issue in each of the following independent cases. Assume interest is paid semiannually. a. A 10-year, 8 percent bond issue; the market interest rate is 10 percent. b. A 10-year, 8 percent bond issue; the market interest rate is 6 percent. c. A 10-year, 10 percent bond issue; the market interest rate is 8 percent.
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:
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a. A 10-year, 8 percent bond issue; the market interest rate is 10 percent.
b. A 10-year, 8 percent bond issue; the market interest rate is 6 percent.
c. A 10-year, 10 percent bond issue; the market interest rate is 8 percent.
d. A 20-year, 10 percent bond issue; the market interest rate is 12 percent.
e. A 20-year, 10 percent bond issue; the market interest rate is 6 percent
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