Bond valuation
This query is : Resolved
11 April 2012
why in valuation of bond it is discounted at market price?
14 April 2012
As there is time period for maturity of bond is much longer and you are not certain whether you will get the same value of the money then it is taken at a discounted value. Let me explain you that you with an example. To day Rs.100 spent by you gives you worth of Rs.100 but after 5 years the same Rs. 100 will give you worth of Rs. 80 but the face value will remain the same this is due to inflation and increase in other cost. That is why discounting is required.
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