To determine a bond’s market value, you’ll need its face value, the number of interest payments due to you before its maturity date and the percentage of interest it pays. Let’s say that a bond’s face value is $1,000, it has five years to go before it matures and its stated interest rate is 10 percent, which is paid annually.
Full Answer
The market value of a bond has two parts: The value of the amount of the bond itself, or its face value, and the value of the interest you would receive if you held on to the bond until it matures. The total of these two amounts is a bond’s market value.
You can do a quick internet search for the name or type of bond you have. For example, “Texas Water Development Board Revenue St Water Implementation Fund” or “municipal bonds.” We’re going to use 8 percent as the current market interest rate. To find the present lump sum value of our $1,000 bond, we are going to use a present value of 1 table.
That $1,000 bond with the 10 percent interest rate would pay $100 a year, or a total of $500 in interest from now until it matures in five years. So, in addition to the bond’s present lump sum value, we need to know the current value of that $500 in interest.
To determine a bond’s market value, you’ll need its face value, the number of interest payments due to you before its maturity date and the percentage of interest it pays. Let’s say that a bond’s face value is $1,000, it has five years to go before it matures and its stated interest rate is 10 percent, which is paid annually.
The market value of a bond has two parts: The value of the amount of the bond itself, or its face value, and the value of the interest you would receive if you held on to the bond until it matures. The total of these two amounts is a bond’s market value.
That $1,000 bond with the 10 percent interest rate would pay $100 a year, or a total of $500 in interest from now until it matures in five years.
Similar means the same maturity date, stated interest rate and credit rating as your bond. You can do a quick internet search for the name or type of bond you have.