Laurel, Inc., and Hardy Corp. both have 8 percent coupon bonds outstanding, with semiannual interest payments, and both are currently priced at the par value of $1,000. The Laurel, Inc., bond has three years to maturity, whereas the Hardy Corp. bond has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of each bond? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Percentage change in price of Laurel, Inc., bond % Percentage change in price of Hardy Corp. bond % If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of each bond? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Percentage change in price of Laurel, Inc., bond % Percentage change in price of Hardy Corp. bond % Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company has a bond outstanding with a par value of €1,000, 25 years to maturity, and a coupon rate of 7.5 percent paid annually. If the yield to maturity is 8.6 percent, what is the current price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current price € Skolits Corp. issued 15-year bonds 2 years ago at a coupon rate of 7.6 percent. The bonds make semiannual payments. If these bonds currently sell for 106 percent of par value, what is the YTM? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) YTM % Microhard has issued a bond with the following characteristics: Par: $1,000Time to maturity: 5 yearsCoupon rate: 8 percentSemiannual payments Calculate the price of this bond if the YTM is: (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Price of the Bond a. 8 percent $ b. 10 percent $ c. 6 percent $
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:
Laurel, Inc., and Hardy Corp. both have 8 percent coupon bonds outstanding, with semiannual interest payments, and both are currently priced at the par value of $1,000. The Laurel, Inc., bond has three years to maturity, whereas the Hardy Corp. bond has 20 years to maturity.
If interest rates suddenly rise by 2 percent, what is the percentage change in the price of each bond? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
| Percentage change in price of Laurel, Inc., bond | % |
| Percentage change in price of Hardy Corp. bond | % |
If rates were to suddenly fall by 2 percent instead, what would be the percentage change in the price of each bond? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
| Percentage change in price of Laurel, Inc., bond | % |
| Percentage change in price of Hardy Corp. bond | % |
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company has a bond outstanding with a par value of €1,000, 25 years to maturity, and a coupon rate of 7.5 percent paid annually.
If the yield to maturity is 8.6 percent, what is the current price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Current price €
Skolits Corp. issued 15-year bonds 2 years ago at a coupon rate of 7.6 percent. The bonds make semiannual payments. If these bonds currently sell for 106 percent of par value, what is the YTM? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
YTM %
Microhard has issued a bond with the following characteristics:
Par: $1,000
Time to maturity: 5 years
Coupon rate: 8 percent
Semiannual payments
Calculate the price of this bond if the YTM is: (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
| Price of the Bond | |||
| a. | 8 percent | $ | |
| b. | 10 percent | $ | |
| c. | 6 percent | $ | |
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