The formula used for the valuation of bonds is shown below (if coupon payments are paid annually):
| where | CP | = | Annual coupon payment |
| i | = | Yield to maturity | |
| n | = | Number of payments (years) | |
| FV | = | Face value (par value) |
If coupon payments are paid semi-annually then:
As for bonds that pay coupon payments quarterly, then just replace 2 in the formula above with 4.
The following table shows some of the yield of bonds with their expected value respectively (assuming coupon payments are paid semiannually):
| Coupon Rate | Yield | Par Value | Bond Value |
| 10% | 8% | 1000 | 1197.93 |
| 10% | 10% | 1000 | 1000.00 |
| 10% | 12% | 1000 | 849.54 |
So, the higher the yield for a bond, the lower is the present value of the bond.
0 on: "Bonds Valuation"