a. What is the bond’s price today, if today’s market interest rate for bonds of comparable maturity and default risk is 8% per year? b. You would like to speculate and believe that tomorrow the market interest rate for comparable bonds would decrease to 5%, would you buy or sell short this bond today? c. Suppose that exactly two years from today the price of the bond will be $900, what is the annual YTM at that time? 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:
Consider a bond issued by MGM Inc. exactly two years ago. At that time the bond’s time to maturity was 30 years. The bond pays semiannual coupons with the coupon rate of 6% per year. The face value of the bond is $1000.
a. What is the
b. You would like to speculate and believe that tomorrow the market interest rate for comparable bonds would decrease to 5%, would you buy or sell short this bond today?
c. Suppose that exactly two years from today the price of the bond will be $900, what is the annual YTM at that time?
Please explain without using excel
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$1,000×6%2? square root of 2?Please clarify im confused of your calculation
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