Debenture of Wal-Mart pays an annual coupon of 12%. It has 6 years left to maturity. The
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Question:
Debenture of Wal-Mart pays an annual coupon of 12%. It has 6 years left to maturity. The face value is $1000. If the current required rate of return is 16%:
i. Without doing any calculations would you expect Wal-Mart's debenture to increase or decrease in value with time, everything else remaining the same?
ii. Under what market conditions would this debenture sell at premium?
iii. If there is a sudden decline in market interest rates such that required rate falls to 10% what will be the percent change in the value of Wal-Mart's debentures?
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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