You own a bond that has duration of 6 years. Interest rates are currently 7% but you believe the Fed is about to decrease interest rates by 0.25%. Your predicted price change on this bond is ________of the current price. +1.40% B. +2.51% C. -1.40% D. -2.51%
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 own a bond that has duration of 6 years. Interest rates are currently 7% but you believe the Fed is about to decrease interest rates by 0.25%. Your predicted price change on this bond is ________of the current price.
+1.40%
B. +2.51%
C. -1.40%
D. -2.51%
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