Bond A is a 4% coupon (paid semi-annually) with 3 years to maturity and $100 face value per contract. The yield curve is flat at 8% per annum. a) Compute the bond's Macaulay Duration. b) Compute the bond's Modified Dollar Duration. c) Yield curves take various shapes, therefore, it is important to understand why these yield curves shift and change slope over time. There are a number of theories and hypotheses of interest rate determination that attempt to explain their shape. Identify and delzribe three (3) of these theories or hypotheses giving examples of each.
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:
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