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Valuation of a coupon bond | Free template

Valuation of a coupon bond is a free template to calculate the value or settlement amount for a coupon bond based on the nominal amount, periodically coupon, market interest rate and remaining maturity.

A coupon bond is a tradable debt instrument for a straight loan which generates revenue through interest payments called coupons. Coupon bonds are issued of the government, residential institutions, businesses, municipalities, county councils and banks to satisfy a long-term capital need. Coupon bonds are traded on the bond market and have maturities of more than 1 year. Coupon bonds are the most common type of bonds and these bonds are paid off only once at the maturity date when the principal amount of the bond are paid by the borrower to the lender.

Issuance and trading of coupon bonds is managed by retailers such as banks and stockbrokers. The prices of coupon bonds are given as a simple annual percentage or yield. Interest on coupon bonds issued by the government is called the risk-free rate.

Coupon bonds are sold to the discounted value of future interest payments and the nominal amount received at maturity. The settlement amount to be paid for a coupon bond is given by the current market rate for the bond and the remaining time to maturity. A higher interest rate ceteris paribus gives a lower settlement amount and a shorter timeframe remaining to maturity results in a higher settlement amount.

In this model for valuing coupon bonds, you can calculate the value or settlement amount for a coupon bond.
Updated: 01-01-2015 | Created by

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