How can the market decide the fair value of a bond
How can the market decide the fair value of a bond?
Expert
The a bond’s fair value is the current value of the bond's coupon interest payments in addition to the current value of the face value payment at maturity, discounted at the market’s required return rate for the bond.
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A stock whose value is now $44.75 is growing on average by 15 percent per annum. Its volatility is 22 percent. The interest rate is 4 percent. You need to value a call option along with a strike of $45, expiring in two months’ time. So, what can you do?
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