You own a $1000 face value 10-year bond with semiannual coupons that will mature is 6 years. Immediately after receiving the 8th coupon of $50, you sell the bond and purchase another newly issued $1000 face value 10-year bond with semiannual coupons of $58 each. Given that the prevailing market rate is ?(2)=8% and the bond you originally owned is redeemable at 105%, find the redemption value of the new bond that you purchase.
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:
5. You own a $1000 face
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