What Factors Affect the Present Value of a Bond?
Bond value refers to the present value of the cash inflows that investors are expected to obtain when making bond investments. The cash inflow of bonds mainly includes two parts: interest and principals recovered when due or cash obtained on sale. When the bond purchase price is lower than the bond value, it is worth buying.
Bond value
Right!
- Bond value
- According to the income capitalization pricing theory of assets, the value of any asset is determined based on the discounted cash income expected by the investor.
- Bond value = future periods
- The calculation formula of the bond value can have the following expressions due to different interest calculation methods.
- Basic model of bond valuation
- Typical bonds are
- Bond value and
- When the value of the bond is higher than the purchase price, bond investment can be made.
- When the value of the bond is lower than the purchase price, the bond investment should be abandoned. [1]