Finance: Bond and Valuation

Bond

Bond is a long term debt contract in which the issuer promises to pay a fixed rate of coupon or interest for principal upon maturity.

Bond Indenture

It is a paper where everything is mentioned about bond. Here bond's characteristics are written.

Types of bond

A. On the basis of issuer

1. Corporate bond
2. Treasury bond
3. Municipal bond

B. On the basis of cash flow

1. Redeemable bond with coupon
2. Zero coupon bond (Pure discounted bond)
3. Perpetual bond (Consol)

Other types of bonds available in market are:-

1. Floating rate debt
2. Income bond
3. Sub-ordinate bond
4. Convertible bond

Valuation

The process of finding intrinsic value or formula value or theoretical value is called valuation.