Market value of the Bond vs derived bond value.

CFA Level II Fixed Income
#1

I am going through the bond valuation and analysis section. However, I am getting a bit confused as I moving forward.

The backward induction and pathwise valuation derive the value of the bond today from the face value at maturity. However, what about the market value of the bond? What determines the market value of the bond today?

Also, correct me if I am wrong, different analysts may have different perspective about the forward rates and the volatility of the interest rate. Therefore, different analysts come up with different values through the model, and then they decide whether to buy/sell the bond based on the derived value?

Please help answer my question. Much appreciate

#2

Mary, who owns the bond, and Bob, who wants the bond, determine the market value of the bond today when they agree on a price and Mary sells it to Bob.

Note: Bob paid too much.

#3

Thank you so much for your answer. Much appreciate

#4

My pleasure.

#5

Hi

I got a problem with calculating FCF, I want to know if this formula is right or not:

FCF= CFO - capital expenditures - dividend

I think it’s wrong because in calculating CFO we already subtracted dividend… please help me

Also, does FCFF equals to FCF!?

What is the difference between this two!?

#6

This question doesn’t apply to this thread.

Please start a new thread with this question.