A company issued bonds with a par value of $250,000 and a maturity of 25 years. The Bonds pay interest every six months based on a nominal interest rate of 8% per year. If on the date of issuance of the bonds the market rate (yield) is 9.25%: a. What will be the selling price of the bonds? b. Make the journal entry to recognize interest expense in the third six-month period of the bonds.
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:
A company issued bonds with a par value of $250,000 and a maturity of 25 years. The Bonds pay interest every six months based on a nominal interest rate of 8% per year. If on the date of issuance of the bonds the market rate (yield) is 9.25%:
a. What will be the selling price of the bonds?
b. Make the
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