What Factors Affect the Value of a Savings 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]