Your client is considering the purchase of a bond that is currently selling for $1112.09. The client wants to know what annual rate of return can they expect to earn on the bond. The bond has 22 years to maturity, pays a coupon rate of 5.5% (payments made semi-annually), and a face value of $1000. (Round to 100th of a percent and enter your answer as a percentage, e.g., 12.34 for 12.34%)
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:
Your client is considering the purchase of a bond that is currently selling for $1112.09. The client wants to know what annual
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