How to Calculate Bond Discount Factor: A Comprehensive Guide for Beginners

How to Calculate Bond Discount Factor: A Comprehensive Guide for Beginners

“Bond discount factor” is a noun, so we can write an opener that starts with its definition and a real-world example:

Bond discount factor, which is the present value of $1 received at the end of a given period, discounted at a given rate of interest, is a critical factor in the valuation of bonds. For instance, a bond with a face value of $1,000, a coupon rate of 5%, and a maturity of 10 years would have a bond discount factor of 0.6139 if the yield to maturity is 8%.

Read more