On 1st July 2010, ABC Ltd issues $15 million in 20 years’ maturity debentures that pay interest each six months of $600 000. The semi-annual interest payments are made on 31st December and 30th June every year. At the time of issuing the securities, the market requires a rate of return of 10%. How much cash will ABC Ltd receive upon issuing this debenture?
By 1st July 2014, the market interest rate for the debenture drops to 6%. At what price will the market value the debenture?
On 1st July 2018, the market interest rate for the debenture is 16%. At what price will the market value of the debenture? What will be the book value of the debenture at 1st July 2018? Assume ABC Ltd will not elect to revalue this debenture to fair value.
If ABC Ltd repurchases, in the open market, 15% of the debenture issue on 1st July 2018 when the interest rate for this debenture is 16%. How much will ABC Ltd pay for the debenture? Record the entry that ABC Ltd will make.

On 1st July 2010, ABC Ltd issues $15 million in 20 years’ maturity debentures that pay interest each six months of $600 000. The semi-annual interest payments are made on 31st December and 30th June every year. At the time of issuing the securities, the market requires a rate of return of 10%. How much cash will ABC Ltd receive upon issuing this debenture?
By 1st July 2014, the market interest rate for the debenture drops to 6%. At what price will the market value the debenture?
On 1st July 2018, the market interest rate for the debenture is 16%. At what price will the market value of the debenture? What will be the book value of the debenture at 1st July 2018? Assume ABC Ltd will not elect to revalue this debenture to fair value.
If ABC Ltd repurchases, in the open market, 15% of the debenture issue on 1st July 2018 when the interest rate for this debenture is 16%. How much will ABC Ltd pay for the debenture? Record the entry that ABC Ltd will make.