Question

Five variables for bond valuation: (if you know any 4 you can find the 5th)

a) Maturity, coupon rate, yield to maturity, market interest rate
b) Face value, maturity, coupon rate, market interest rate
c) Face value, coupon rate, yield to maturity, market interest rate
d) Face value, maturity, yield to maturity, market interest rate

Answer 1

A bond's valuation is determined by variables such as face value, coupon rate, yield to maturity, and market interest rate.

Step-by-step explanation:

In finance, a bond has several variables that are important for its valuation. These variables include:

1. The bond's face value, which is the amount the borrower agrees to pay the investor at maturity.
2. The bond's coupon rate or interest rate, which is the rate at which the borrower agrees to pay interest to the investor.
3. The bond's yield to maturity, which is the rate of return anticipated on a bond if it is held until it matures.
4. The market interest rate, which is the prevailing interest rate in the market.

Knowing any four of these variables allows you to calculate the fifth variable. For example, if you know the bond's face value, coupon rate, yield to maturity, and market interest rate, you can calculate the bond's present value.