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Sir ,
Inorder to find redemption yeild do I need to find M.V?i.e if 4% debentures redeemable in 2 years @ 5% premium.. Investors Required rate =10% M.V 98
Then is the redemption yeild as follows.:
Year 1-2 : 5× (A.f)
Year 2. : 105×(Dcf)If the investors required rate of return is 10%, then by definition the redemption yield is 10%.
The market value is the PV of the interest and redemption flows discounted at 10%.
You are either given the required return and are expected to calculate the MV, or you are given the MV and are expected to calculate the required return (which is the IRR of the flows).
Do watch my free lectures again on this.
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