Based on the following data, calculate an expected price and standard deviation. (Face value= 1,000 I = 7%) Maturity of the bond is 4 years; you are going to sell it next year, so that remaining maturity is 3 years Probability Required Yield Price Prob* Price Prob (P-EP) 2 0.5 7.00% 0.1 7.20% 0.4 7.40% What is your expected price when you sell the bond? What is the standard deviation of the bond price?
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:
- Based on the following data, calculate an expected price and standard deviation.
(Face value= 1,000 I = 7%) Maturity of the bond is 4 years; you are going to sell it next year, so that remaining maturity is 3 years
|
Probability |
Required Yield |
Price |
Prob* Price |
Prob (P-EP) 2 |
|
0.5 |
7.00% |
|
|
|
|
0.1 |
7.20% |
|
|
|
|
0.4 |
7.40% |
|
|
|
What is your expected price when you sell the bond?
What is the standard deviation of the
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