If I had 5% redeemable debentures with a maturity date July 2025 and semi annual payments on 1st jan and 1st july, how would I apply the capm to such a security?
any help is welcome
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capm and redeemable debentures
6y ago#1It is very unlikely that you would be asked to apply CAPM to debentures in the exam.
You would need to be given the beta of the debt. If you were given it then you could calculate the investors required return (in exactly the same way as we would for equity).
You could then calculate the market value of the debt in the normal way - by discounting the six monthly interest flows and the redemption at the investors required rate of return.
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