# Coupon bond formula

market, as a bond approaches maturity, the present value of its future payments converges to the par value; therefore, the par value becomes more important than the prevailing interest rates. If this were not so, you could make a fortune buying bonds right before they paid interest then selling them afterward. As shown in the formula, the value, and/or original price, of the zero coupon bond is discounted to present value. The bond makes semi-annual coupon payments, and the yield to maturity. . This pricing convention allows different bonds with different face values to be compared directly. Thus, a bond with a face value of 1,000 which is selling for par, sells for 1,000, and a bond with a face value of 5,000 that is also selling for par will both have their price listed as 100, which means their prices are. The bond pricing formula then becomes. Accrued interest is determined using the actual/actual convention.

Basis is the default, if omitted) 1 actual days in month/actual days in year 2 actual days in month/360 3 actual days in month/365 (even for a leap year) 4 European 30/360 ExamplesUsing Microsoft Office Excel for Calculating Bond Prices and Discounts The following listed. The face value is replaced with the call price since this is the amount that the investor will receive if the bond is called. As an example, suppose that a bond is sold on June 15, 2016 with a maturity date of June 15, 2036. . The present value of the second coupon payment. A 5 year zero coupon bond is issued with a face value of 100 and a rate.

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