A)You buy a 6 year bond with an annual 8% coupon at par value, $1000. If the yield to maturity at the end of the first year falls to 5% or jumps to 10% what is the end of the year value of the bond(after the coupon payment, so bond value does not include this coupon)? B) Calculate your holding period return.
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:
only do B
A)You buy a 6 year bond with an annual 8% coupon at par value, $1000. If the yield to maturity at the end of the first year falls to 5% or jumps to 10% what is the end of the year value of the bond(after the coupon payment, so bond value does not include this coupon)?
B) Calculate your holding period return.
Step by step
Solved in 3 steps
