The following tutorial question serves as practice questions on TVM and Bond Valuation. (Answer All Parts of the Question A-H) 1. Bond Relationships. Select one or more of the following phrases to complete the following sentences. increase , decrease, par, discount, premium, less than, more than, greater , less a. If the current interest rate exceeds the bond’s coupon rate, the bond will sell at a ___________. b. The value of a bond to increase if there is a/an ________ in interest rates. c. A bond’s coupon rate is more than the interest rate, therefore the bond is selling at a _____________. d. As interest rate increases the value of a bond will ______________. e. If the bondholder’s required rate of return equals the coupon interest rate, the bond will sell at _________. f. A premium bond sells for ____________ as maturity approaches. g. The discount bond sells for ____________ as maturity approaches. h. A bondholder with a short-term bond is exposed to ___________ interest rate risk than when owing a long-term bond.
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:
The following tutorial question serves as practice questions on TVM and
1. Bond Relationships. Select one or more of the following phrases to complete the following sentences. increase , decrease, par, discount, premium, less than, more than, greater , less
a. If the current interest rate exceeds the bond’s coupon rate, the bond will sell at a ___________.
b. The value of a bond to increase if there is a/an ________ in interest rates.
c. A bond’s coupon rate is more than the interest rate, therefore the bond is selling at a _____________.
d. As interest rate increases the value of a bond will ______________.
e. If the bondholder’s required rate of return equals the coupon interest rate, the bond will sell at _________.
f. A premium bond sells for ____________ as maturity approaches.
g. The discount bond sells for ____________ as maturity approaches.
h. A bondholder with a short-term bond is exposed to ___________ interest rate risk than when owing a long-term bond.
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