Answered: Find the price if the bond is…

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Finance

Find the price if the bond is redeemable at par at the end of (a) 10 years; (b) 15 years; (c) 20 years.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 4P

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Concept explainers

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:

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A $10, 000, 5% bond with semiannual coupons is pried to yield 7%. Find the price if the bond is redeemable at par at the end of (a) 10 years; (b) 15 years; (c) 20 years.

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