Legal Definitions - bond table

A bond table is a specialized chart or schedule used to determine the current market value of a bond. It helps investors and financial professionals quickly calculate what a bond is worth today by considering three main factors: the fixed interest rate the bond pays (its coupon rate), the remaining time until the bond's principal amount is repaid (its time to maturity), and the total annual return an investor would receive if they held the bond until it matures (its effective yield or yield to maturity).

Here are a few examples to illustrate how a bond table is used:

• Individual Investor Selling a Bond: Imagine an individual investor, Mr. Henderson, owns a corporate bond that pays a 4% annual interest rate and matures in 7 years. He wants to sell this bond because he needs cash for a down payment on a house. To determine a fair selling price, he consults a bond table. By inputting his bond's 4% coupon rate, its 7-year time to maturity, and the current market's effective yield for similar bonds (say, 3.5%), the bond table quickly shows him the approximate current market value of his bond. This helps him set a realistic asking price for potential buyers.

  This illustrates the term because Mr. Henderson uses the bond table as a tool to find the current value of his bond based on its specific characteristics and prevailing market conditions, rather than performing complex calculations himself.

• Financial Advisor Portfolio Valuation: A financial advisor, Ms. Chen, manages a diverse portfolio for her clients, which includes various government and municipal bonds. At the end of each quarter, she needs to provide an updated valuation of the portfolio's assets. Instead of manually calculating the present value of each bond, which can be time-consuming, she uses a bond table. For each bond in the portfolio, she inputs its coupon rate, remaining maturity, and the current effective yield for bonds of similar risk and duration. The bond table then provides the current market price for each bond, allowing her to quickly and accurately assess the total value of the bond holdings for her client reports.

  This illustrates the term by showing how a bond table streamlines the process of valuing multiple bonds for financial reporting and portfolio management, using the key inputs of coupon, maturity, and yield.

• Corporate Treasury Investment Decisions: The treasury department of a large corporation is considering investing surplus cash in a new set of bonds. They are evaluating several options from different issuers, each with varying coupon rates and maturities. The treasurer uses a bond table to compare these options. For example, they might look at a bond with a 2.5% coupon maturing in 10 years versus another with a 3% coupon maturing in 5 years, both under the current market yield of 2.8%. The bond table allows them to quickly see the current price and relative attractiveness of each bond option, helping them make an informed decision about which bonds offer the best value for the company's investment strategy.

  This illustrates the term by demonstrating its use in comparing different bond investment opportunities based on their defining financial characteristics to make strategic purchasing decisions.