Your customer purchased a 5% debenture at a price of 94 maturing in 12 years. What is the yield to maturity?

To determine the yield to maturity (YTM) of a debenture, it's essential to consider several key components: the annual coupon payment, the current price of the bond, the face value, and the time remaining until maturity.

In this scenario, the debenture has a coupon rate of 5%, which means it pays 5% of its face value annually. The price of the debenture is 94, which indicates it is being sold at a discount to its typical face value of 100. The time to maturity is 12 years.

The YTM represents the total return an investor can expect if the bond is held until it matures, taking into account both the annual coupon payments and the capital gain (or loss) that occurs because the bond is being purchased at a discount (since it was bought for 94 rather than 100).

To find the YTM, one would generally use the following formula which includes estimating the yield based on the bond's current price, expected cash flows, and maturity:

YTM = [C + (F - P) / n] / [(F + P) / 2]

where:

C = annual coupon payment (5% of 100 = 5),

F = face value