How To Use A Bond Calculator
Lesson summary:
This lesson explores how the value of a bond changes with fluctuations in interest rates. The bond calculator offered by Buffett’s Books is a useful tool that allows investors to understand the effects of these changes on the bond’s value. As an example, consider a 30-year bond with a 5% coupon and a par value of $1,000 purchased in 2012. If the market interest rate drops to 4%, the bond calculator can determine the market price of the bond, which will increase due to the bond’s coupon rate being higher than the market interest rate. On the other hand, when the bond is close to maturity, the bond price will decrease as the buyer will only receive a small number of interest payments before the bond matures. The bond calculator makes it easier to understand these changes and their impacts on the bond’s value.