Assume that a 10-year Treasury bond pays a coupon of 12% annually, and a 15-year Treasury bond pays a coupon of 8% annually. The yieldcurve is flat; all Treasury securities have a ten-year maturity with a ten-percent yield. Which of the above is the most accurate statement? a. The 10-year Treasury note is trading at a disadvantage, while the 15-year Treasury note is trading at a profit. b. The ten-year bond is trading at a discount to par, while the fifteen-year bond is trading at par. c. If interest rates decline, all bonds' prices will raise, although the 15-year bond's price increase will be greater in percentage terms. d. If the yield to maturity for all bonds stands at 10% for the next year, the 10-year bond's price will rise, whereas the 15-year bond's price will decrease. e. The statements c and d are accurate.
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:
Assume that a 10-year Treasury bond pays a coupon of 12% annually, and a 15-year Treasury bond pays a coupon of 8% annually. The yieldcurve is flat; all Treasury securities have a ten-year maturity with a ten-percent yield. Which of the above is the most accurate statement?
a. The 10-year Treasury note is trading at a disadvantage, while the 15-year Treasury note is trading at a profit.
b. The ten-year bond is trading at a discount to par, while the fifteen-year bond is trading at par.
c. If interest rates decline, all bonds' prices will raise, although the 15-year
d. If the yield to maturity for all bonds stands at 10% for the next year, the 10-year bond's price will rise, whereas the 15-year bond's price will decrease.
e. The statements c and d are accurate.
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