Back to Basics
We take you back to the credit basics to review everything you thought you already knew but were too afraid to ask ... Dominic Pegler, head of fixed-income strategy for Europe at Barclays Global Investors in London, explains how a bond is priced
Bonds usually start their life at, or close to, a price of 100 and at maturity they usually finish at a price of 100 as well. However, during a bond's life the price increases and decreases in accordance with the yield that the bond delivers to its investors. To price a bond you need to know a minimum of three pieces of information: interest paid by the bond (coupon); yield to maturity; time to maturity.
A bond's price is simply today's value of each of the interest payments and the final value
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