BEST Company bonds are yielding 12% and will mature in 10 years from now. The coupon rate is 14% and are paid semiannually. The bonds have a par value of $1,000 and the coupons are paid semiannually. 1. What is the semiannual coupon that is paid to the investor? 2. What is the price of the bond? 3. Is this a premium or a discount bond and why? 4. If the bond would be selling for $1200, will the bond be yielding more than, less than or equal to the current yield of 12%? Why?
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:
BEST Company bonds are yielding 12% and will mature in 10 years from now. The coupon rate is 14% and are paid semiannually. The bonds have a par value of $1,000 and the coupons are paid semiannually.
1. What is the semiannual coupon that is paid to the investor?
2. What is the price of the bond?
3. Is this a premium or a discount bond and why?
4. If the bond would be selling for $1200, will the bond be yielding more than, less than or equal to the current yield of 12%? Why?
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