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Bond valuation in Excel

Bond valuation in Excel

From the course: Understanding Capital Markets

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Bond valuation in Excel

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- [Instructor] Excel is an important tool for investors for many reasons, but one of its great applications is the ability to do bond valuation. Let's take a look at an example. I'm in the 03_03_Begin Excel file. So I've set up a little chart here. We're going to value a bond, and we're going to base this on four key variables: maturity, coupon, par, and yield. Those four variables are going to let us figure out the price of the bond. Okay, so let's just say that this is a 20-year bond as an example. And we're going to make this an annual bond. It's going to pay over time. The coupon, let's say, is 5%, for example. Let's say that the par value on the bond is 1,000. That's pretty typical. And let's just say that the yield on the bond is maybe 6%. How do we go through and figure out the value of this bond? Well, I'm going to put in =pv, open parentheses, so this is the present value formula. Then we have four different functions to fill in: rate, number of periods, pmt or payment, and…

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