Determining the price of a coupon bond is essential for investors seeking fixed income returns. A coupon bond represents a loan made by an investor to a corporation or government. In return, the investor receives regular interest payments (coupons) and the repayment of the principal amount upon maturity.
Understanding how to calculate coupon bond prices empowers investors to make informed decisions when purchasing or selling these securities. It allows them to assess the bond’s value relative to the current market conditions and interest rates.