A company has a P1,200 face value bond with 8 years until maturity. The bond possesses a characteristic of being callable at 105% of the par in year 3. The current price of each bond is P1,300 with 10% annual coupon. What is the approximate yield to maturity? A 7.69% B 8.53% C 8.01% D 8.12%
A company has a P1,200 face value bond with 8 years until maturity. The bond possesses a characteristic of being callable at 105% of the par in year 3. The current price of each bond is P1,300 with 10% annual coupon. What is the approximate yield to maturity? A 7.69% B 8.53% C 8.01% D 8.12%
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 4MC
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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:
Question
A company has a P1,200 face value bond with 8 years until maturity. The bond possesses a characteristic of being callable at 105% of the par in year 3. The current price of each bond is P1,300 with 10% annual coupon. What is the approximate yield to maturity?
A 7.69%
B 8.53%
C 8.01%
D 8.12%
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