Would a bond be more or less desirable if you learnedthat it has a sinking fund that requires the company to redeem, say, 10% of the original issue eachyear beginning in 2025, either through open marketpurchases or by calling the redeemed bonds at par?How would it affect your answer if you learned thatthe bond was selling at a high premium, say, 130%of par, or at a large discount, say, 70% of par?
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:
Would a bond be more or less desirable if you learned
that it has a sinking fund that requires the company to redeem, say, 10% of the original issue each
year beginning in 2025, either through open market
purchases or by calling the redeemed bonds at par?
How would it affect your answer if you learned that
the bond was selling at a high premium, say, 130%
of par, or at a large discount, say, 70% of par?
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