Finance•Chapter 13•2 min read

Finance — Bond Valuation — The Elegance of Fixed Income

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OIYO EditorialContributor
13/14

Bond Valuation

A bond is a certificate by which the issuer promises to pay the investor principal and interest at specified future dates. Unlike stocks, bond cash flows are predetermined — making valuation relatively straightforward in principle. But the key is understanding its dynamic relationship with market interest rates.

1. How Bond Prices Are Determined

A bond’s price is the sum of all future coupon payments and principal, discounted to present value.

Bond Pricing Formula
P = \sum_{t=1}^(n) \frac{C}{(1+r)^t} + \frac{M}{(1+r)^n}
C: coupon payment, M: face value, r: market yield (YTM), n: maturity

2. Interactive Bond Simulation

See how a bond’s price changes as the market’s required yield (discount rate) shifts.

인터랙티브 채권 가격 계산기

₩
년
5%
4%
채권 현재 가격 (PV)
₩10,278
할증 발행 (Premium)

3. Types of Bond Issuance

  • Par Issue: Coupon rate = Market rate (Price = Face value)
  • Discount Issue: Coupon rate < Market rate (Price < Face value)
  • Premium Issue: Coupon rate > Market rate (Price > Face value)

Bonds are the backbone of a stable portfolio. Understanding how bond values shift with interest rate movements is one of the most important keys to reading macroeconomic trends and financial markets.

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