6. a)One bond has a coupon rate of 8%, another a coupon rate of 12%. Both bonds have 10-year maturities and sell at a yield to maturity of 10%. Assume the bonds pay annual interest. If their yields to maturity next year are still 10%, what is the rate of return on each bond?(Round your answer to the nearest whole percent.) b) Does the higher coupon bond give a higher rate of 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:
6.
a)One bond has a coupon rate of 8%, another a coupon rate of 12%. Both bonds have 10-year maturities and sell at a yield to maturity of 10%. Assume the bonds pay annual interest. If their yields to maturity next year are still 10%, what is the
b) Does the higher coupon bond give a higher rate of return?
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