Jasz
VIP Contributor
Bond valuation is a method of determining the value of a bond or bond portfolio. Bonds are always issued by the issuer, and their price reflects the issuer's creditworthiness, as well as the market's perception of that creditworthiness.
The price of a bond is calculated based on two factors: an interest rate and a term to maturity. The interest rate is derived from the amount paid for the bond by investors, as well as what they expect will be paid over time to compensate them for holding the bond. The longer the term to maturity, the higher the price will be; however, if you pay more for a longer-term bond than you would for a shorter-term one, then you're paying for something other than just how much money you'll get back in return on investment. However, we can further say Bond valuation is the process of estimating the value of bonds based on their interest rates, duration and credit quality. It involves calculating the present value (PV) of a bond's expected cash flows, which are usually calculated using an appropriate discount rate.
The price of a bond is calculated based on two factors: an interest rate and a term to maturity. The interest rate is derived from the amount paid for the bond by investors, as well as what they expect will be paid over time to compensate them for holding the bond. The longer the term to maturity, the higher the price will be; however, if you pay more for a longer-term bond than you would for a shorter-term one, then you're paying for something other than just how much money you'll get back in return on investment. However, we can further say Bond valuation is the process of estimating the value of bonds based on their interest rates, duration and credit quality. It involves calculating the present value (PV) of a bond's expected cash flows, which are usually calculated using an appropriate discount rate.