Discussion: Valuing Bonds
For bond investors, it is usually less difficult to value a bond as opposed to a stock. Investors who seek bonds will have a lot of known factors to aid them, such as the coupon rate, maturity date, and credit rating. However, there are certain unknown factors when valuing bonds that can be difficult to predict, such as interest rates and inflation.
In this Discussion, you will select a bond and explain how a feature of that bond is used to determine its value.
To prepare for this Discussion:
- Select a type of bond feature, and consider why it is important, as well as whether it adds value to either the investor or the issuer. Also, review the concept of yield-to-maturity and its importance to valuing a bond.
- Review the Academic Writing Expectations for 2000/3000-Level Courses, provided in this week’s Learning Resources.
By Day 3
Post a 150- to 225-word (2- to 3-paragraph) explanation of how your selected bond feature is used to determine the value of a bond. In your explanation, include the following:
- Describe the bond feature you selected in detail.
- Explain how the feature is used to determine bond value, including the importance of yield-to-maturity.
- To support your response, be sure to reference at least one properly cited scholarly source.
By Day 5
Respond with at least 75 words (1 paragraph) each to two or more of your colleagues’ postings by doing one of the following:
- Provide an alternate perspective on your colleague’s selected bond feature.
- Contrast your colleague’s selected bond feature with the feature you selected.
Return to this Discussion in a few days to read the responses to your initial posting. Note what you have learned or any insights you have gained as a result of the comments your colleagues made.