Talk:Bond valuation

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What is a bond price?[edit]

I came here seeking the answer to the question, since the usage "price" sounded odd since even I give it an objective association such as in the price of a commodity such as gold, and I was curious how a financial instrument could have such a price. The answer is clear upon examination a few links deep but apparently doesn't make it in a clear way to the surface of the front matter here. In essence, the bond buyer is an "investor" or financier of the enterprise issuing the bond (essentially an ordinary loan at a given rate of interest rate, and possibly other terms). The "coupons" which the issuer pays in discrete time periods are the interest, earnings, profit which the buyer of the bond collects in these periods (I presume whether or not this includes principal repayment is irrelevant) . Finally, the price is the value determined from prevailing rates in the market in which the instrument is floated if the buyer had been able to obtain that rate (determined as shown in the calculations), i.e. in effect an opportunity cost calculated based on the principle of the time value of money which the buyer calculates for tying up his money in the loan embodied in the bond (in the way shown in the formulæ). 72.228.150.44 (talk) 20:45, 12 February 2009 (UTC)[reply]

Present Value explaination[edit]

The equation for the present value relationship of bond pricing is terrible for our purposes of bond valuation discussion. We should introduce the concept of bond valuation by linking to a present value page, sure, and then indicate that

it's PVAnnuity that we use to find the present value of the interest paments and

It's PV that we use to find the present value of the par value / face value of the bond.

..the sum of these two answers is described as the future cash flows of a bond or the Bond Price.

PVA(Annual interest payments) + PV(Par Value) = Bond Price

The Bond Price is the price at which an investor is willing to buy a bond. Additional factors deteremining this price include: the discount rate and the rating of the bond (risk of default).

If a bond has a coupon rate (annual interest rate) which differs from the discount rate then the bond must be sold at either a discount or a premium (depending on whether the present value of the bond's future cash flows is greater than the face value or less than the face value). The idea of the bond is that it will provide the investor with the same interest returns as other bonds of similar ratings.

Does this seem like a better aproach to everyone else? —Preceding unsigned comment added by Xetxo (talk • contribs) 04:08, 10 March 2009 (UTC)[reply]

Put full variable names into equation, instead of abbreviation/notation[edit]

Presenting equations, like in bond valuation, would be easier to understand, if the meaning for the variables were simply inserted in place of the variables (into the equation). If these variable names are presented to acquaint a reader/learner with commonly used notation, then it could be introduced below (i.e instead of assigning meaning to variables used in the equation, the full descriptions of the variable could be assigned with the commonly utilized notation). — Preceding unsigned comment added by 137.132.3.10 (talk) 11:23, 22 November 2012 (UTC)[reply]

shouldn't that be sigma times phi, not plus[edit]

shouldn't that be sigma times phi, not plus — Preceding unsigned comment added by 63.226.223.25 (talk) 07:37, 10 April 2013 (UTC)[reply]

Cannot see the formula[edit]

The article refers to a formula , in the "Present value approach " sector, but I cannot see it. Is it a problem with my browser or the article?

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Bond "price" vs. "value"[edit]

Greetings Wikipedians! "Section 1: Bond Valuation" lists several ways to calculate the "price" of a bond. But "price" seems like the wrong word in this context. "Price" is set through a transaction when buyer and seller agree. Value is an opinion on what something is worth. This is an article about valuation, not price. The methods and equations shown are ways to arrive at an opinion on the VALUE of a bond. Value is in the eye of the beholder and is not absolute because those equations require assumptions that involve judgement -- for example, the discount rate, or the spread vs. a 10-year US Treasury. Potential buyers and sellers calculate the value at which they are willing to transact. Those values become a range of bid and ask offers on the marketplace quotation system. Price is determined when buyer and seller agree on value and a transaction takes place. Therefore, the lead should be something like "Bond valuation is the process by which an investor arrives at an estimate of the intrinsic worth of a bond." Comments and thoughts, please? Cordially, BuzzWeiser196 (talk) 11:41, 18 July 2021 (UTC)[reply]

There's been no objection (indeed, no response of any kind) to this comment which I posted over a year ago, so I made the change. BuzzWeiser196 (talk) 12:01, 22 August 2023 (UTC)[reply]

Removed reference to Investopedia[edit]

Greetings Wikipedians! There has been debate about whether Investopedia is a reliable source. Search Wikipedia:Reliable sources/Noticeboard and you'll see what I mean. I try to avoid the use of Investopedia whenever possible. As User:Specifico said in the forum, if the topic is important, there's always a better source. In this case, I was able to find a reference to a well-known university textbook (refname: Bodi). Cordially, BuzzWeiser196 (talk) 11:46, 22 August 2023 (UTC)[reply]