Problem 3: Straight Bonds, Semiannual ABC Corporation plans to issue pieces of 12%, 10-year, P1,000 face value bonds that pays semiannually. It will be sold at 104 but the underwriter will charge 2% on issue price. What is the cost of the bond based on the following methods? 1. Interpolation method using multiples of 1% (guess annual rates of whole percentage but halve this for semiannual rates). 2. Yield-to-maturity formula
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:
Problem 3: Straight Bonds, Semiannual
ABC Corporation plans to issue pieces of 12%, 10-year, P1,000 face
1. Interpolation method using multiples of 1% (guess annual rates of whole percentage but halve this for semiannual rates).
2. Yield-to-maturity formula
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 4 images