Q: Assuming that the bond was issued several years. Is it true the following equation can be used to find the value of a bond with N years to maturity that pays interest once a year?

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Yield to maturity assumes that the bond is held up to the maturity date. This is a disadvantage. If the bond is a yield to call , it can be called prior to the maturity date. Thus, the ivestor should sell the callable bond prior to maturity if he expects that he will earn higer return by doing so (in other words when yeild to call is higher than held to maturity).

The promised yield to maturity calculation assumes

The issuer will call the bonds and issue new bonds to the maturity date.

The value of a call option on maturity is equal to its intrinsic value.For instance, a call option with a strike price of $10 on maturity and its underlying stock being at $15 will have a value of $5, which is its intrinsic value.

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Related questions

A yield to maturity is the internal rate of return on a bond held to maturity, assuming scheduled payment of principal and interest.

yes

There is no bond specified. Probably the one with the greatest maturity.

Face value plus interest.

Yes. At maturity you get the final coupon payment in addition to the return of principal.

Runoff cash flow refers to assets that are prepaid before maturity or liabilities that are withdrawn before maturity. In either case, the result is higher interest rate risk. This is because the interest rate risk is measured assuming no prepayment of assets or withdrawal of liabilities occur before maturity. The risk of runoff cash flows is one of the important weaknesses of the repricing model, which is commonly used model in smaller financial institutions.

The new value to a loan or investment after interest.

The principle and interest.

Interest rate risk is measured by time to maturity and coupon rate

if a bond has finite maturity or limited maturity then we must consider not only the interest rate stream but also the maturity value (face value).regardsSajida Gul

Yes it is

maturity value