suppose you purchase a 30​-year Treasury bond with a 5% annual​ coupon, initially trading at par. In 10 ​years' time, the​ bond's yield to maturity has risen to 6% ​(EAR). ​ (Assume $100 face value​ bond.) a. If you sell the bond​ now, what internal rate of return will you have earned on your investment in the​ bond? b. If instead you hold the bond to​ maturity, what internal rate of return will you earn on your initial investment in the​ bond? c. Is comparing the IRRs in ​(a​) versus ​(b​) a useful way to evaluate the decision to sell the​ bond? Explain.   1. If you sell the bond​ now, what internal rate of return will you have earned on your investment in the​ bond?   The IRR of the bond is nothing​%. ​(Round to two decimal​ places.)

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A:

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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: