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How Are Bond Issue Prices Determined

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How are bond issue prices determined?


Definitions:

Present Value

The calculation that determines the worth of a future amount of money or series of cash flows at the present time, factoring in a specific interest rate.

Discount Rate

The interest rate applied for calculating the present worth of anticipated cash flows in future during the discounted cash flow analysis process.

Compounded Monthly

Interest calculation method where the interest earned each month is added to the principal, thus increasing the amount of subsequent interest accrued.

Factorial ANOVA

A statistical test used to determine the effect of two or more independent variables on a dependent variable, allowing for interactions between variables.

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