“If you expect decrease in interest rate then buy bonds preferably with longer maturity for price appreciation and vice-versa.” Which bond management strategy is mentioned in the above statement? Discuss the same 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:
“If you expect decrease in interest rate then buy bonds preferably with longer maturity for
price appreciation and vice-versa.” Which bond management strategy is mentioned in the above
statement? Discuss the same in detail.
A 30-year maturity, 10% coupon bond paying coupons semiannually is callable in five years at a
call price of Rs.1,100. The bond currently sells at a yield to maturity of 8%. What is the yield to
call? What is the yield to call if the call price is only Rs.1,050? What is the yield to call if the call
price is Rs. 1,100 but the bond can be called in two years instead of five years?
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