Consider a 10-year Treasury bond with a 12 percent annual coupon and a 15-year Treasury bond with an 8 percent annual coupon. The yield curve is smooth, at a 10-percent yield to maturity on all Treasury securities. Which argument is the most accurate?
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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:
Consider a 10-year Treasury bond with a 12 percent annual coupon and a 15-year Treasury bond with an 8 percent annual coupon. The yield curve is smooth, at a 10-percent yield to maturity on all Treasury securities. Which argument is the most accurate?
a. The 10-year bond is available at a bargain, while the 15-year bond is available at a premium.
b. The 10-year bond is trading at a discount to par, while the 15-year bond is trading at par.
c. As interest rates fall, all bonds' prices will rise, although the 15-year
d. If all bonds' yields to maturity stay at 10% for the next year, the 10-year bond's price would rise while the 15-year bond's price will decline.
e. c and d are right statements.
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