Question

How do I calculate a Bond

Answer 1

The solution to how do i calculate the bond price is :

The coupon interest payments are paid in a bond till maturity and these coupon payments are discounted at the required rate of return to finally calculate the present bond price.

PV = PM1/ (1+ Re)^1 + PM2/(1 + Re)^2 + PM3/(1+ Re)^3 + ........... (PMN + FACE VALUE OF BOND) /(1 + Re)^n

Where n is the maturity date of the bond.

The PM is the coupon payments

Re is the required rate of return of the bond.

PV is the present value of bond.