Consider an 8% coupon bond selling for $953.10 with three years until maturity making annualcoupon payments. The interest rates in the next three years will be, with certainty, r1 = 8%, r2 =10%, and r3 = 12%. Calculate the bond’s (a) yield to maturity and (b) realized compound yield.
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:
Consider an 8% coupon bond selling for $953.10 with three years until maturity making annualcoupon payments. The interest rates in the next three years will be, with certainty, r1 = 8%, r2 =10%, and r3 = 12%. Calculate the bond’s (a) yield to maturity and (b) realized compound yield.
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