Consider an 8% coupon bond (with a face value of $1,000) currently selling for $953.10. The bond has three years until its maturity. The bond makes annual coupon payments. The interest rates in the next three years will be, with certainty, r1 = 8%, r2 = 10%, and r3 = 12%. a. Calculate the bond’s yield to maturity b. Calculate the bond’s realized compound yield. please explain the answer in detail
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:
Consider an 8% coupon bond (with a face value of $1,000)
currently selling for $953.10. The bond has three years until its
maturity. The bond makes annual coupon payments. The
interest rates in the next three years will be, with certainty, r1 =
8%, r2 = 10%, and r3 = 12%.
a. Calculate the bond’s yield to maturity
b. Calculate the bond’s realized compound yield.
please explain the answer in detail ( do not use Excel)
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