while bond prices fluctuate
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Bond prices fluctuate on the open market in response to supply and demand for the bond. Furthermore, the price of a bond is determined by discounting the expected cash flow to the present using a discount rate.
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As with any free-market economy, bond prices are affected by supply and demand. Bonds are issued initially par value, or $100. 1 In the secondary market, a bond's price can fluctuate. The most influential factors that affect a bond's price are yield, prevailing interest rates and the bond's rating.
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