Suppose a bond manager owns $5 million par value of bond X which trades at $70, has a modihed duration of 6, and has a par value of $100. The manager wants to swap bond X for bond Y, which trades at $85, has a modified duration of 35, and has a par value of $100. If the manager wants the dollar duration of bond Y to be the same as the dollar duration of bond X how much in par value of bond Y should the manager buy? O $8.571,428.57 O $6.000,000.00 O $10,084,033.61 O $7,058,823.53
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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