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How do you think a country's economy affect bond valuation?

How do you think a country's economy affect bond valuation?

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Answer #1

Valuation of bond involves following components
Interest rate
Redemption value
No of years till maturity
Yield to maturity

The first 3 components mentioned above is determined by the company
While YTM is determined by country's economic condition
YTM is nothing but interest rate that would be offered to bond holders of a bond is issued today. In other words it is current market interest rate. If company's economic condition detoriates this interest rate will also go down thus affecting presently issued bonds which are traded in the market. Thus country's economic condition affects valuation of bond

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