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31 sie 2024 · Bond valuation is a way to determine the theoretical fair value (or par value) of a particular bond. It involves calculating the present value of a bond's expected...
20 sie 2021 · Bond valuation is a method of determining the value of corporate bond, based on the future value of the coupon payments, maturity date, and face value. Similar to using a DCF to value Visa, we use the same method for Visa's corporate bonds.
Bond valuation is the process by which an investor arrives at an estimate of the theoretical fair value, or intrinsic worth, of a bond. As with any security or capital investment, the theoretical fair value of a bond is the present value of the stream of cash flows it is expected to generate.
The formula for the Present Value technique of bond valuation is PV = C/ (1 + r)^n + F/ (1 + r)^n, where PV is present value, C is the annual coupon payment, r is the discount rate or required rate of return, n is the number of years until maturity and F is the bond's face value.
Estimate the value of a bond. Calculate various measures of bond yield. Read bond and stock quotations. Value a preference stock. Calculate the value of a stock using the dividend discount model and the P/E ratio approach. Show the relationship between E/P ratio, expected return, and growth.
As we have briefly discussed, bond valuation is determined by time value of money techniques, most notably present value calculations. This makes logical sense when one considers that an investment in a bond involves a series of future cash inflows, or payments from the bond issuer to the bondholder over the term of the bond’s maturity.
