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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 bonds are purchased from the market at $985.50. Given that $2.00 pays the accrued interest, the remainder ($983.50) represents the underlying value of the bonds. The following table illustrates the values of these terms. The market convention for corporate bond prices assigns a quoted (clean price) of $983.50.
Yield to put (YTP): same as yield to call, but when the bond holder has the option to sell the bond back to the issuer at a fixed price on specified date. Yield to worst (YTW): when a bond is callable, puttable, exchangeable, or has other features, the yield to worst is the lowest yield of yield to maturity, yield to call, yield to put, and others.
There is a time dimension to the analysis of bond values. A 10-year bond at purchase becomes a 9-year bond a year later, and the year after it becomes an 8-year bond, etc. Each year the bond moves incrementally closer to maturity, resulting in lower volatility and shorter duration and demanding a lower interest rate when the yield curve is rising.
In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as government or not-for-profit entity.
The yield elasticity of bond value is the elasticity of the market value of a bond with respect to its yield—the percentage change in bond value divided by its causative percent change in the yield to maturity of the bond. Equivalently, it is the derivative of value with respect to yield
Tax-free municipal bonds are not just a source of investment but also a significant contributor to public projects such as roads, schools and hospitals. ... the market value of existing bonds ...
In a discrete (i.e. finite state) market, the following hold: [2] The First Fundamental Theorem of Asset Pricing: A discrete market on a discrete probability space (,,) is arbitrage-free if, and only if, there exists at least one risk neutral probability measure that is equivalent to the original probability measure, P.