Finance Formulas / July 17, 2018 / Alyvia French
Bond valuation is a technique for determining the theoretical fair value of a particular bond. Bond valuation includes calculating the present value of the bond's future interest payments, also known as its cash flow, and the bond's value upon maturity, also known as its face value or par value. Because a bond's par value and interest payments are fixed, an investor uses bond valuation to determine what rate of return is required for a bond investment to be worthwhile.
Spreading the cost over multiple accounting periods helps provide a clearer picture of how your expenditures compare with your earnings. It also ensures that your accounting complies with federal rules for calculating depreciation.
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