You purchase a corporate bond on January 1, 2008. The bond has an 8% annual coupon (interest paid annually), $1000 par value, and 10 years until maturity. The yield to maturity on the bond is 7%. Assume you sell the bond after 1 year (i.e., on January 1, 2009); the yield to maturity on the bond is now 6%. What is your holding period return on 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:
You purchase a corporate bond on January 1, 2008. The bond has an 8% annual coupon (interest paid annually), $1000 par value, and 10 years until maturity. The yield to maturity on the bond is 7%. Assume you sell the bond after 1 year (i.e., on January 1, 2009); the yield to maturity on the bond is now 6%. What is your holding period return on the bond?
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