In part one, we discussed about buying Singapore Government Securities (SGS) and Retail Corporate Bonds on SGX. In part 2, we will go into more general aspects of bonds, which are applicable to bonds worldwide. We briefly described bond basic terminologies as well in Part 1, now we will go into bond valuation.
Bond Valuation
Bond valuation happens to be one of the most misunderstood aspects of bonds. When we talk about bond valuation, we are not just concerned with the coupon payment. That is because a bond may be issued below par value, at par or above par. So the value of a bond consists of 2 parts, the value of all the future coupon payments and the difference between the purchase/issue price and maturity value (normally denominated in $1000).
Bonds tend to be valued using yields, which basically mean how much returns you would get on your investment ...
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