Bradford Manufacturing Company has just issued a 13-year, 13% coupon interest rate, $1,000-par bond that pays interest Semi annually. The required return is currently 15%, and the company is certain it will remain at 15% until the bond matures in 13 years. a). Assuming that the required return does remain at 15% until maturity, find the value of the bond. b) a bond’s yield to maturity is 9% and coupon interest rate is 18%,state whether the price of the bond will be at a premium to par, at par, or at a discount to par.
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:
Bradford Manufacturing Company has just issued a 13-year, 13% coupon interest rate, $1,000-par bond that pays interest Semi annually. The required return is currently 15%, and the company is certain it will remain at 15% until the bond matures in 13 years. a). Assuming that the required return does remain at 15% until maturity, find the value of the bond. b) a bond’s yield to maturity is 9% and coupon interest rate is 18%,state whether the price of the bond will be at a premium to par, at par, or at a discount to par.
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