You are given the following information about a bond: Face value $1,000 Coupon rate 5% annual Redemption Value $1,200 Tenor 4 years This bond is purchased to yield an annual effective rate of 3%. (i) Calculate the Macaulay Duration of the bond. (ii) Calculate the Modified Duration of the bond. (iii) Calculate the Convexity of the bond.
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:
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