The current quoted price of a 13% coupon bond is $110. It pays coupon semi-annually. The next coupon will be paid in 6-days (total number of days in this semi-annual period is 181) and the futures contract will last for 62-days. The term structure rate of interest is flat at 12% and the conversion factor for the bond is 1.5. Assume there is 184-days in half year for the futures. Compute the quoted futures price of the contract. (A) $110.01 (B) $73.34 (C) $112.03 (D) $109.83
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 quoted price of a 13% coupon bond is $110. It pays coupon semi-annually. The next coupon will be paid in 6-days (total number of days in this semi-annual period is 181) and the futures contract will last for 62-days. The term structure rate of interest is flat at 12% and the conversion factor for the bond is 1.5. Assume there is 184-days in half year for the futures. Compute the quoted futures price of the contract.
(A) $110.01
(B) $73.34
(C) $112.03
(D) $109.83
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