Bond valuation

Bond valuation is like a loan. When you buy a bond, you are basically loaning money to the company that issued it. The company agrees to pay you back the money with interest at a later date. The company pays you back the principal at the end of the loan term and pays you interest periodically until the loan is paid off. The value of the bond depends on how much it will pay you in total interest. To figure out how much you can expect to get from the bond, you need to calculate the present value of all the future payments. Present value is an estimate of how much all the future payments are worth today. So, the higher the present value, the higher the bond valuation is.