You're considering a bond with a maturity of 10 years, face value of 1,000. The surface interest rate of these bonds is 9% and interest (coupon) is paid twice a year. What is the current price of this bond if you require an annual effective interest rate of 8.16% (not a nominal interest rate!)?
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:
You're considering a bond with a maturity of 10 years, face value of 1,000. The surface interest rate of these bonds is 9% and interest (coupon) is paid twice a year. What is the current price of this bond if you require an annual effective interest rate of 8.16% (not a nominal interest rate!)?
Using excel PV function to calculate price of the bond
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