Assume the spot rates for the next six years are given by:s1= 0.03, s2= 0.0385, s3= 0.0446, s4= 0.0490, s5= 0.0521, s6= 0.0543. a) Compute the price of a 5.5% coupon bond (annual coupon payment) with face value $100and maturity six years. b) What is the quasi-modified duration of the bond? c) Determine next year’s spot rates s′1, s′2, s′3, s′4, s′5according to expectation dynamics.
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:
Assume the spot rates for the next six years are given by:s1= 0.03, s2= 0.0385, s3= 0.0446, s4= 0.0490, s5= 0.0521, s6= 0.0543.
a) Compute the price of a 5.5% coupon bond (annual coupon payment) with face value $100and maturity six years.
b) What is the quasi-modified duration of the bond?
c) Determine next year’s spot rates s′1, s′2, s′3, s′4, s′5according to expectation dynamics.
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