Which of the following observations is the most accurate? 34. A callable bond will have a lower required rate of return than a noncallable bond, assuming all other factors remain stable. b. If all other factors were equal, a company would choose to issue noncallable bonds over callable bonds. c. From the perspective of a traditional investor, reinvestment rate risk is higher than interest rate risk. d. If a 10-year, $1,000 par, zero coupon bond was sold at a price that offered buyers a 10% rate of return, and interest rates fell to the point where kd = YTM = 5%, we might be certain that the bond would sell for more than its $1,000 par value. e. If a 10-year, $1,000 par, zero coupon bond was sold at a price that provided borrowers with a 10% rate of return, and interest rates subsequently fell to the point where kd = YTM = 5%, we might be certain that the bond would sell at a discount below its $1,000 par value.
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:
Which of the following observations is the most accurate? 34.
A callable bond will have a lower required
b. If all other factors were equal, a company would choose to issue noncallable bonds over callable bonds.
c. From the perspective of a traditional investor, reinvestment rate risk is higher than interest rate risk.
d. If a 10-year, $1,000 par, zero coupon bond was sold at a price that offered buyers a 10% rate of return, and interest rates fell to the point where kd = YTM = 5%, we might be certain that the bond would sell for more than its $1,000 par value.
e. If a 10-year, $1,000 par, zero coupon bond was sold at a price that provided borrowers with a 10% rate of return, and interest rates subsequently fell to the point where kd = YTM = 5%, we might be certain that the bond would sell at a discount below its $1,000 par value.
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