2-year zero coupon bond has a face value of £100 and a price of £92. A three year zero coupon bond has a price of £94. Neither bond has call or put options. What advice would you give to your clients. A. Buy the 3-year bond and sell the 2-year bond. B. Buy the 3-year bond and use the repo market to finance the purchase. C. Sell the 2-year bond D. Sell the 3-year 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:
A 2-year zero coupon bond has a face value of £100 and a price of £92. A three year zero coupon bond has a price of £94. Neither bond has call or put options. What advice would you give to your clients.
A.
Buy the 3-year bond and sell the 2-year bond.
B.
Buy the 3-year bond and use the repo market to finance the purchase.
C.
Sell the 2-year bond
D.
Sell the 3-year bond
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