Bonds can be valued by breaking them into two separate components: an annuity consisting of the identical and regular interest payments, plus a lump-sum principal payment at maturity.

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Bonds are often valued by separating them into two components: the series of regular interest payments, which can be treated as an annuity, and the principal repayment at the end of the bond's term, which is considered a lump-sum payment. This method simplifies the valuation process by allowing each component to be valued separately using present value calculations.

Bonds Can Be Valued by Breaking Them into Two Separate