Bond is considering a debt instrument that give the interest at periodic stream to investors and principle amount going to repay on maturity date specified earlier. A legal contract going to prepare between buyer and seller which contain all the legal requirements, terms and conditions of bonds. Many factors included in the bonds like sinking fund provision, put provision, call provision, maturity, coupon, coupon rate and face value.

In the field of financial instrument, bond pricing is empirical matter. In every issuance of bond, the price of bond depends on coupon, principle or par value, yield to maturity and periods to maturity. The main characteristics of the bond are: a bond with the higher yield to maturity or market rates will be priced low, a bond with a higher number of periods to maturity will be priced higher, a bond with higher par value will be higher and bond with higher coupon rate will be higher.

Bonds that consider more valuable that widely traded instead of that bonds that traded sparsely. Investor also wary for purchasing that bond that face problem in selling and this element let down the piece of bonds at the time of liquidation. (corporatefinanceinstitute.com, 2019)

The issue price of bond is stele with the market interest rate and that interest rate of the bond and they both are going to pay at the same date. Following are the basic steps to determine the price of the bonds: find out the interest amount that going to pay from bonds. Determine the present value of the bond. Determine the present value of the interest payment and then calculate the bond price. (accountingtools.com, 2019)

The market value or selling price of the bond is the present value of the cash in future that obtain from the bonds. The payment of the face value of the bond and semiannual interest payment at the date of maturity will be discounted with the interest rate of market. The market interest rate going to change on hourly basis whereas the bond interest rate never changes.

Bond are going to issue by borrowers for long term investment and issuers are foreign entities, municipalities, corporations and US treasury. The price of bond equals to present value of the cash flow future expected. The interest rate is discounted the cash flow of bond which is known as yield to maturity. It includes 3 methods: pricing coupon bond, adjusting the semiannual coupon and pricing zero coupon bond. (GraduateTutor.com, 2018)

Amortization bond with effective rate of interest: the amounted bond premium must be amortized to interest expense over the life of bond when the bod is going to sold at premium. Effective interest rate method is considering must preferred method for amortization the premium of bond. Under this method, the amount of interest will be collaborating with the book value of bond in a given year. When the book value going to decrease, the amount of interest also going to decrease. (accountingcoach.com, 2019)

Straight line amortization method is helping in allocating the interest to a bond through its life equally. The process of recording the interest expense until its maturity with associate the bond equally.

Bonds are often used in retirement for investment. But it considers that many people invest in bonds for long term investment purpose. Bonds can buy a portfolio keeping it a float in a stock market with their reliability and steady return. Coupon rate determine by issuers use the prevailing market interest rate and bonds maturity to measure the competitive interest rate and can be expressed as annual percentage of the face value. Interest rate of bonds may be fixed or float. After issuance of bond, it can be traded on secondary markets and with the increase of interest rate, the bonds also going to rise. (Coryanne Hicks, 2018)

The advantages of corporate bonds are varied options for investors, select the preferred coupon structure like zero or fixed rate, step coupon rate, floating coupon rates, better yield, liquidity and certainty investment. The disadvantages of bonds are higher credit risk, secondary market, and interest rate risk. (infoforinvestors.com, 2019)

Reference of Bond amortization

accountingcoach.com. (2019). Amortizing Bond Premium with the Effective Interest Rate Method. Retrieved from https://www.accountingcoach.com/bonds-payable/explanation/8

accountingtools.com. (2019, april 2). how to calculate the issue price of the bond. Retrieved from https://www.accountingtools.com/articles/how-to-calculate-the-issue-price-of-a-bond.html

corporatefinanceinstitute.com. (2019). What is Bond Pricing? Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/bond-pricing/

Coryanne Hicks, S. W. (2018, april 3). The Ultimate Guide to Bonds. Retrieved from https://money.usnews.com/investing/investing-101/articles/the-ultimate-guide-to-bonds

GraduateTutor.com. (2018). An Introduction to Bonds, Bond Valuation & Bond Pricing. Retrieved from http://www.graduatetutor.com/corporate-finance-tutoring/yields-bond-valuation-pricing/

infoforinvestors.com. (2019, march 20). Corporate Bonds Pros And Cons. Retrieved from https://infoforinvestors.com/academy/bonds/corporate-bonds-pros-cons/