[R-SIG-Finance] Seeking help to understand the Bond value

[Edu]

The prices in both cases must be equal and the yield must be 5% as current price is equal to face. Look at formulas and play a bit to understand... If you want to discuss the implications in practice drop me an email. However i warn you, bonds are complex instruments being derivatives rather than base and once you go into yield curves and actual day counting it becomes pragmatic problem. 

Sent from my iPhone

> On 22 Mar 2014, at 15:02, Christofer Bogaso <bogaso.christofer at gmail.com> wrote:
> 
> Hi again,
> 
> It may be really simple, however I believe there may be some gap in my
> understanding on how Bond works.
> 
> Let say at time T, I buy a bond with face value $1mn for 2 years maturity
> with coupon rate 5%, coupon will be paid semmi-annually.
> 
> In this case, my question is: what is the value of bond at time T?
> 
> Is it that, value of bond at time T is the face-value, since I paid $1mn
> right this time?
> 
> or,
> 
> It is the discounted future cash flow?
> 
> I understand that at time (T+dT), the value of this bond will be the
> discounted values of the cfs. But I am confused on it's value at time T,
> just when I bought that bond.
> 
> Thanks for your explanation.
> 
>    [[alternative HTML version deleted]]
> 
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