A $1000 par value bond with 7% annual coupons maturing at par in 4 years sells at a price to yield 6% effective. If the interest rate decreases to 5.77%, Find the difference between the estimate of the new price using the first-order modified approximation and the estimate of the new price using the first-order Macaulay approximation.
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 $1000 par
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
