![]() ■ Considering that the bond price is higher than the par value the bond should be selling at a premium. ![]() Let’s figure out its correct price in case the holder would like to sell it: Let’s assume that someone holds for a period of 10 years a bond with a face value of $100,000, with a coupon rate of 7% compounded semi-annually, while similar bonds on the market offer a rate of return of 6.5%. IF c r AND Bond price < F then the bond should be selling at a discount. IF c r AND Bond price > F then the bond should be selling at a premium. ![]() IF c = r then the bond should be selling at par value. (n = 1 for Annually, 2 for Semiannually, 4 for Quarterly or 12 for Monthly)Īfter the bond price is determined the tool also checks how the bond should sell in comparison to the other similar bonds on the market by these rules: The algorithm behind this bond price calculator is based on the formula explained in the following rows: This figure is used to see whether the bond should be sold at a premium, a discount or at its face valueas explained below. Market interest rate represents the return rate similar bonds sold on the market can generate. This financial calculator approximates the selling price of a bond by considering these variables that should be provided:įace/par value which is the amount of money the bond holder expects to receive from the issuer at the maturity date as agreed.Ĭoupon rate is the annual rate of return the bond generates expressed as a percentage from the bond’s par value.Ĭoupon rate compounding frequency that can be Annually, Semi-annually, Quarterly si Monthly. How does this bond price calculator work?
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