Fixed-Income Bond Valuation: Prices and Yields

How to price a fixed-rate bond from its market discount rate on and between coupon dates, how to read the yield-to-maturity back out of a price, how coupon, maturity and yield shape price behaviour, and how matrix pricing estimates prices for bonds that rarely trade.

1. 1. Pricing a bond with a market discount rateA bond's price is its promised coupons and principal discounted at the market discount rate, and comparing that rate with the coupon rate tells you at once whether the bond trades at par, a discount or a premium.Video · 7 minFree12 min
2. 2. Yield-to-maturity: the bond's internal rate of returnThe yield-to-maturity is the single discount rate that makes the PV of a bond's cash flows equal its observed price, and an investor earns it only under three strict conditions.Video · 5 min12 min
3. 3. Between coupon dates: accrued interest, flat and full priceBetween coupon dates a bond's full price is the PV of its cash flows on the settlement date, and it splits into the quoted flat price plus the accrued interest owed to the seller.Video · 7 min14 min
4. 4. How coupon, maturity and yield drive bond pricesPrices move inversely with yields, and the size of the move depends on the coupon (lower → bigger), the maturity (longer → usually bigger) and the direction (falls in yield lift prices more than equal rises cut them).Video · 6 min14 min
5. 5. Matrix pricing for illiquid and new bondsWhen a bond has no recent trade, estimate its yield from comparable bonds that do trade, interpolate to its maturity and discount its cash flows at that yield.Video · 6 min13 min
6. 6. Integrated cases: building and reading a pricing matrixA matrix-pricing case is won before any calculation: only actively traded bonds of similar credit quality, bracketing the target's maturity, enter the grid; then you average yields by maturity, interpolate, and only at the end discount the target's own coupons.15 min