You manage a $800M bond portfolio and own a bond with an annual coupon of 35 with 5 years to maturity. The bond currently trades at a yield to mautirty of 0.5% What is the coupon rate of the bond? What is the price of the bond? Assume that the bond has a duration of 4.5 years At ytm of 0.05% what is the current yield on the bond? What is the bonds modified duration If you anticipate that a downgrade in the bonds rating will result in an increase in bond’s yield to maturity to 1.25%, what is the expected percentage change in the bond price
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:
You manage a $800M bond portfolio and own a bond with an annual coupon of 35 with 5 years to maturity. The bond currently trades at a yield to mautirty of 0.5%
- What is the coupon rate of the bond?
- What is the price of the bond?
Assume that the bond has a duration of 4.5 years
- At ytm of 0.05% what is the current yield on the bond?
- What is the bonds modified duration
- If you anticipate that a downgrade in the bonds rating will result in an increase in bond’s yield to maturity to 1.25%, what is the expected percentage change in the
bond price
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