Calculating the present value of future coupon payments, along with the present value of the principal repayment at maturity, is a good way to determine the value of a bond.

Question

Quizplus · Accepted Answer

This method, known as discounting the future cash flows (coupon payments and principal repayment) to their present value, is a fundamental approach in finance for determining the value of a bond. It accounts for the time value of money, reflecting the principle that a dollar today is worth more than a dollar in the future.

Calculating the Present Value of Future Coupon Payments, Along with the Present