Consider an annual 4 year coupon bond paying a coupon rate of 5%. If it is 1000 par and the YTM= .04 (use atleast5 decimal places for this question) A. What is the price of this bond? B) What is the bond modified duration? C) Use the bond’s modified duration to estimate the price change of the bond if YTM changes to .045. (So positive price change of $40.2 would be written 40.2 and a negative price change of $40.2 would be writen as-40.2) Please explain without using excel
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:
1.
Consider an annual 4 year coupon bond paying a coupon rate of 5%. If it is 1000 par and the YTM= .04 (use atleast5 decimal places for this question)
A. What is the price of this bond?
B) What is the bond modified duration?
C) Use the bond’s modified duration to estimate the price change of the bond if YTM changes to .045. (So positive price change of $40.2 would be written 40.2 and a negative price change of $40.2 would be writen as-40.2)
Please explain without using excel
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
