MATHEMATICS IN THE MODERN WORLD

Imelda B. Antonio
Mary Hope H. Gravoso
BONDS AND BOND VALIDATION
At the end of this module, you are expected to:

1 Understand the concept of bonds.

2. Validate bonds by determining its current value.
3. Determine the yield rate of bonds to give the best investment.
Bond
• it is an interest bearing contract which obligates the borrower to make payments
of interest and principal on specific dates to the holder of the bond. This is usually
issued by a government or a company for large loans by individuals, companies
or other investors.
Bond
• Borrowed principal(H)-refers to the face value or par value of the bond.

• Nominal rate (r)- bond rate or coupon rate

• Periodic payment (K)- represents the interest earned date or coupon date also referred to as coupon
annuity payments

• Final redemption value(V)-amount where the borrower is obliged to pay before the bond is
surrendered to the borrower
Bond Validation
• The process of determining the current value of a bond. It includes the
computation of the present value of the bond’s future interest payments and the
value of the bond on the maturity date.

Formulas
𝒓
V= Hrr and K= H(𝒎)
Bond valuation by General Formula

A bondholder can freely sell a bond before its maturity date.

Yield or investment rate (i) –specified rate

Price (P)-amount on which a purchaser is willing to pay for a bond on any
coupon date
References and Supplementary Materials
1. Richard Aufmann ,Joanne Lockwood ,Richard Nation ,Daniel Clegg ,Susanna S.
Epp;2018;Mathematics in the Modern World;Manila ,Philippines;Rex
Bookstore,Inc
2. Susana S. Epp;2011;Discrete Mathematics:An Introduction to Mathematical
Reasoning;Brooks/Cole ;Cengage Learning
3. Darwin P. Paguio, et al;2013;Mathematics of Investment; Tinajeros,Malabon;
Jimczyville Publications