A Bond has a face value of ₵ 1000 and pays a coupon of 10% annually. It has five-year life. The market interest rate (yield to maturity) is 10%. Find the Duration of this bond Find the convexity of this bond If the interest rate increase by 5%, by how much will the bond price decrease Compute the new price 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 has a face value of ₵ 1000 and pays a coupon of 10% annually. It has five-year life. The market interest rate (yield to maturity) is 10%.
- Find the Duration of this bond
- Find the convexity of this bond
- If the interest rate increase by 5%, by how much will the
bond price decrease - Compute the new price of the bond
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