The first step in finding the value of a bond is to

Question

Quizplus · Accepted Answer

Before calculating the value of a bond, it is necessary to identify the cash flows that the holder of the bond will receive. These cash flows usually consist of periodic interest payments and the principal repayment at maturity. Once these cash flows are identified, the next step is to discount them back to the present value using an appropriate interest rate, which represents the yield available on other bonds of like risk and maturity. Therefore, option B is the correct answer, while options A, C, and D are incorrect.

The First Step in Finding the Value of a Bond