Slide 1

Bond & Stock ValuationsKiran ThapaBond ValuationBond valuation is the process of determining the fair price of a bond. The value of a bond is a function ofAmount and timing of expected cash flows,Riskiness of the cash flows, and Investor's required rate of returnBond's value, also called intrinsic value.

Bond Price can be calculated as:

The basic decision rule can be stated as follows:

Where, V0 = Present value of the bond, determined by using the appropriate discount rate; P0 = Market price of the bond.

V0 = C PVIFAy, n + M PVIFy, nIFTHENREASONV0 >P0BuyUnder valuedV0