Bond Pricing

Bond pricing refers to determining the value of a bond, which is essentially a loan an investor gives to a borrower (like a government or corporation) in exchange for periodic interest payments and the return of the principal at maturity. A bond's price is influenced by its interest rate (coupon rate), the prevailing market interest rates, the time remaining until maturity, and the credit quality of the issuer. If market rates rise, existing bonds may lose value since new issues offer better returns, while lower rates can increase a bond’s price. Ultimately, bond pricing balances risk, interest, and time.