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Chapter 19. Working with Bonds > Calculating Bond Prices

Calculating Bond Prices

If you're a bond investor and have a particular goal in mind, you might need to earn a minimum yield to meet that goal. For example, you might need a bond to return 6% on your investment. You've seen that bond yields and prices have an inverse relationship. When prices fall, yields rise; when prices rise, yields fall. So if a particular bond's yield is too low, you need to wait for the price to fall far enough that you meet your yield target. The question is, however, how far is “enough”? In other words, what price will produce the yield you're looking for?


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