If considering investing in bonds or a bond-related investment such as bonds funds or bond ETFs, then an understanding of how interest rates affect the price and value of a bond to the investor is essential.

Fixed Income Securities: The Value of a Bond Held to Maturity

If a bond is purchased at the point of issue and held to maturity, then the value of the bond to the investor is simply the par value of the bond issued, plus the sum of the coupon interest payments to be made over the life time of the bond.

As fixed income securities, the coupon payments of a bond will not fluctuate with underlying moves in the base rate of interest as issued by central banks. However, movements in underlying interest rates will see the relative value of the investment fluctuate.

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