The current market price of a two-year 25 percent coupon bond with a $1,000 face value is $1,219.71 The current market price of a one-year pure discount bond with a $50 face value is $44.64. a)What must the price of a two-year pure discount bond with a $2,500 face value be in order to avoid arbitrage?
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:
The current market price of a two-year 25 percent coupon bond with a $1,000 face value is $1,219.71
The current market price of a one-year pure discount bond with a $50 face value is $44.64.
a)What must the price of a two-year pure discount bond with a $2,500 face value be in order to avoid arbitrage?
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