A bond currently sells for 1,200, which gives it a yield to maturity of 8%. Suppose that if the yield increases by 25 basis points, the price of the bond declines to 1,155. Based on this price change, what is the duration of the bond?
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 bond currently sells for 1,200, which gives it a yield to maturity of 8%. Suppose that if the yield increases by 25 basis points, the price of the bond declines to 1,155.
Based on this price change, what is the duration of the bond?
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