Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question

. How is the value of a bond determined?

Expert Solution
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Step 1

Bond valuation:

It may be a method utilized to decide a given bond's hypothetical reasonable value. The bond valuation incorporates deciding the PV of potential future coupon installments of a bond, frequently alluded to as its cash stream, and the value of the bond at due regularly alluded to as its par value.

Step 2

Since the face value of a bond and coupon installments are set, a speculator employments bond valuation to determine what rate of return is required to form bond investment beneficial.

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