MSS Ltd has recently issued bond to attract new funding. The bond issue has 30 years to maturity and a coupon rate of 5.8% per annum, with coupons paid annually. The face value of the bond is $1,000. If the required rate of return on these bonds is 7.5% per annum, the current market price of MSS Ltd’s bonds should be closest to:
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:
MSS Ltd has recently issued bond to attract new funding. The bond issue has 30 years to maturity and a coupon rate of 5.8% per annum, with coupons paid annually. The face value of the bond is $1,000. If the required
Step by step
Solved in 4 steps
