Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
. How is the value of a bond determined?
Expert Solution
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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