When would it make sense for a firm to call a bond issue? A) when the market price of the bond exceeds the call price, and market interest rates are greater than the bond's coupon rate B) when the market price of the bond exceeds the call price, and market interest rates are less than the bond's coupon rate C) when the market price of the bond is less than the call price, and market interest rates are greater than the bond's coupon rate D) when the market price of the bond is less than the call price, and market interest rates are less than the bond's coupon rate
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:
When would it make sense for a firm to call a bond issue?
- A) when the market price of the bond exceeds the call price, and market interest rates are greater than the bond's coupon rate
- B) when the market price of the bond exceeds the call price, and market interest rates are less than the bond's coupon rate
- C) when the market price of the bond is less than the call price, and market interest rates are greater than the bond's coupon rate
- D) when the market price of the bond is less than the call price, and market interest rates are less than the bond's coupon rate
Bonds are debt securities issued by Government or other companies, who seek to raise money from public. In simple words, it is a type of loan to them, in which the investor gets fixed interest till the time of maturity and gets the principal amount at par at the same time.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
