Based on the behaviour of the bond market, a set of theorems for bond valuation has been developed. State briefly these theorems used for the purpose of bond valuation.

Theorems for Bond Value Based on the behavior of the bond market a set of theorems for bond valuation has been put forward by some authors. The theorems are as under: When the required rate of return ('r') is equal to the coupon rate the value of the bond is equal to the par value. When the required rate of return is greater than its coupon rate the value of the bond will be less than its par value. When the required rate of return is less than the coupon rate the value of the bond will be greater than its par value. When the required rate of return is greater than coupon rate the discount on the bond decreases as it approaches maturity. When the required return is less than coupon rate the premium on the bond declines as it approaches maturity. Bond price is inversely proportional to it's YTM. The longer the term to maturity, for a given difference between YTM & Coupon rate, the greater will be the change in price with changes in price. For an equal size increase or decrease in YTM, the bond price changes are not symmetrical. That is to say, in given maturity of a bond, the bond price change will be greater with a decrease in bond's YTM, than the change in bond price with an equal increase in bond's YTM. Other things being the same, for a given change in YTM, the percentage of price change in respect of high coupon rate bond will be smaller than in case of bonds of low coupon rate. A change in YTM affects the bonds with higher YTM in comparison to bonds with lower YTM.