Investors can determine the approximate market value of a bond by estimating the amount of money the bondholder is expected to receive through interest payments (future cash flows), determining changing interest rates into the estimation of future cash flows and combining those figures together to produce an estimated value. Essentially, a bond's market value is about equal to what a secondary market investor can expect to receive in future cash flows, meaning that the bond's market value is roughly equal to the amount of money the bond holder can receive through interest payments, notes Investopedia.com.Continue Reading
Bonds are essentially a loan that a borrower, a company or a government takes from a lender, which is the investor. Rather than a traditional loan, a bond gives companies and governments the opportunity to borrow money from investors, who benefit not only from being paid back by the borrower but also by receiving interest payments on the bond until it comes due, also known as maturing, according to LearnVest.com.
Interest payments for the bond may vary based on the prevailing interest rates of the time, meaning that changing interest rates can have an impact on a bond's market value. That's why it is somewhat difficult to calculate market value. There are online bond value calculators that can help individuals estimate the current market value of a bond such as the one at Calculator.com.Learn more about Investing