What are the excel formulas and answers to Part A and Part B. Part A: (Left Side) KIMCHI CORPORATION's capital investment bonds have a maturity of 10 years with a face value of $1,000 and a semi-annual 10% coupon. They are callable in 3 years at $1150 and currently sell for $1,290. What is the nominal yield to maturity and the nominal yield to call? What return should investors expect to earn on these bonds. Part B: (Right Side) KIMCHI CORPORATION also has bonds with 5 years left to maturity with an annual coupon of 10%. What would be the yield to maturity at a current market price of $850? What would be the yield to maturity if the current market price would be $1,125? What would be the price of the bond to you if your cost of capital was 12%? What would be the price of the bond to you if your cost of capital was 8%?
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:
What are the excel formulas and answers to Part A and Part B.
Part A: (Left Side)
KIMCHI CORPORATION's capital investment bonds have a maturity of 10 years with a face value of $1,000 and a semi-annual 10% coupon. They are callable in 3 years at $1150 and currently sell for $1,290. What is the nominal yield to maturity and the nominal yield to call? What return should investors expect to earn on these bonds.
Part B: (Right Side)
KIMCHI CORPORATION also has bonds with 5 years left to maturity with an annual coupon of 10%. What would be the yield to maturity at a current market price of $850? What would be the yield to maturity if the current market price would be $1,125? What would be the price of the bond to you if your cost of capital was 12%?
What would be the price of the bond to you if your cost of capital was 8%?
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