Bank of Paris has €1,000 face value, 5.2% coupon rate (semi-annual coupon payments) with an original maturity of 20 years. The bonds were issued three years ago and are callable 10 years from the issue date and thereafter (on coupon dates) for par. The bonds currently sell for €1,000. What is the yield to maturity of the bond, what is the yield to call and what is the yield to worst? Are the bonds likely to be called?
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:
Bank of Paris has €1,000 face value, 5.2% coupon rate (semi-annual coupon payments) with an original maturity of 20 years. The bonds were issued three years ago and are callable 10 years from the issue date and thereafter (on coupon dates) for par. The bonds currently sell for €1,000. What is the yield to maturity of the bond, what is the yield to call and what is the yield to worst? Are the bonds likely to be called?
Step by step
Solved in 2 steps
