A 5-year bond with a yield of 4% (continuously compounded), with a face value of $100, pays an 3% coupon at the end of each year. What is the bond’s price? (You can use your calculations for the next questions) A 5-year bond with a yield of 4% (continuously compounded) pays an 3% coupon at the end of each year. What is the bond’s duration? Use the calculations from the previous problem to make it easier, and you can use your duration answer for the following question.
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:
A 5-year bond with a yield of 4% (continuously compounded), with a face value of $100, pays an 3% coupon at the end of each year.
What is the
(You can use your calculations for the next questions)
A 5-year bond with a yield of 4% (continuously compounded) pays an 3% coupon at the end of each year.
What is the bond’s duration?
Use the calculations from the previous problem to make it easier, and you can use your duration answer for the following question.
Step by step
Solved in 4 steps with 4 images
