6-year Treasury bonds yield 5.37%. The inflation premium (IP) is 1.74%, and the maturity risk premium (MRP) on 6-year bonds is 0.50%. What is the real risk-free rate, r*? Group of answer choices 3.22% 3.13% 2.94% 3.19% 3.04%
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:
The Treasury bonds are the debt securities issued by the U.S. government for the purpose of raising funds, and investors in these bonds to generate returns at minimum or no risk. The treasury bonds are low or zero risk assets as they are backed by the U.S. government, therefore, the return on these securities are also low.
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