Theoretical redemption value — OpenTuition Forums

HHermine10y ago

I can't remember within the context of what I read about theoretical redemption value? And don't know when it can be necessary to calculate it and how. Could you please remind me?

John MoffatAdmin10y ago#1

There is no such term as 'theoretical redemption value' :-)

HHermine10y ago#2

I found it. We need to calculate the theoretical redemption value of a zero coupon bond ti find the debt redemption value, which is used for calculating the equity value using Black scholes.

John MoffatAdmin10y ago#3

Now it makes sense (on its own it means nothing). Zero coupon bonds pay no interest, so the only return to investors is the gain that they effectively make on redemption. The theoretical redemption value is that redemption value that makes the annualised return equal to that required by investors.

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