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The value of the bond is simply the PV of all of the expected future cash...

The value of the bond is simply the PV of all of the expected future cash flows. In other words, the value of the bond is the PV of the coupon payments plus the present value of the par, or face, value. What are some red flags that would prompt you to think twice before investing in a bond?

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Answer #1

Some Red flags before investing in a bond are:
1. It should be checked whether bond is junk bond or not. Credit rating of the bond should be checked.
2. Liquidity of the bond in the secondary market is another problem .
3. Interest rate risk, maturity risk,etc are other problems in investing a bond.

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