Consider an annual 2 year coupon bond paying a coupon rate of 7%. If it is 1000 par and the YTM= .06 A) What is the price of this bond? Answer: 1018.33 B) What is thebond’s modified duration? Answer: 1.82 C) Use the bond’s modified duration to estimate the pricechange of the bond if YTM changes to .055. (So positiveprice change of $40.2 would be written 40.2 and a negativeprice change of $40.2 would be writen as-40. Answer: 9.29 D) Price at 10 yearsemi-annual coupon bond with a 5%coupon rate and a YTM of 8%. If par is 1000. Answer: 796.14
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 annual 2 year coupon bond paying a coupon rate of 7%. If it is 1000 par and the YTM= .06
A) What is the price of this bond?
Answer: 1018.33
B) What is thebond’s modified duration?
Answer: 1.82
C) Use the bond’s modified duration to estimate the pricechange of the bond if YTM changes to .055. (So positiveprice change of $40.2 would be written 40.2 and a negativeprice change of $40.2 would be writen as-40.
Answer: 9.29
D) Price at 10 yearsemi-annual coupon bond with a 5%coupon rate and a YTM of 8%. If par is 1000.
Answer: 796.14
Note: Please explain without using excel.Thanks
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