Consider the following two-bond portfolio of option-free bonds;Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6%Par amount owned R3,45 million R2 millionMarket value R30 367.59 (in 000’s) R18 528 (in 000’s)Assume that the duration of Bond A and B is 4.2 and 7.5 respectively; determine the duration of the portfolio.
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 the following two-bond portfolio of option-free bonds;Bond A Bond B Years to maturity 5 years 10 years Coupon rate 5% 5% Par value 1000 1000 Yield to maturity 8% 6%
Par amount owned R3,45 million R2 million
Market value R30 367.59 (in 000’s) R18 528 (in 000’s)
Assume that the duration of Bond A and B is 4.2 and 7.5 respectively; determine the duration of the portfolio.
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