Compute the price of the following bonds: Bond A: Coupon bond, 4% coupon paid semi-annually, with maturity of 14 years. Bond B: Zero coupon bond with maturity of 7 years. Bond C: Coupon bond, 7.75% coupon paid yearly, with maturity 10 years. Assume that all 3 bonds have the same nominal: 1000 euro. Your required rate of return is the same for each bond and equal to 6%
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:
Compute the price of the following bonds:
- Bond A: Coupon bond, 4% coupon paid semi-annually, with maturity of 14 years.
- Bond B: Zero coupon bond with maturity of 7 years.
- Bond C: Coupon bond, 7.75% coupon paid yearly, with maturity 10 years.
Assume that all 3 bonds have the same nominal: 1000 euro.
Your required rate of return is the same for each bond and equal to 6%.
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