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:
Using the following information, determine the maturity risk premium on 10 year bonds:
| Rate | % |
| inflation | 1.99 |
| T-bill | 5.00 |
| 10y T-Bond | 6.00 |
| 10y AAA Corporate | 6.44 |
| 10y AA Corporate |
7.59 |
note: your answer should be to 2 decimal places. So, if your answer is 3.253%, for example, then enter 3.25 without the percent sign.
Maturity risk premium refers to the extra premium that the investors earns when holding a security for long term as compared to the short term securities. The T-Bonds are the long term U.S. treasury bonds.
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