What is the valuation methodology for fixed-rate bonds and zero-coupon bonds?

The valuation methodology for fixed-rate bonds and zero-coupon bonds indeed involves the same discount methodology, which is based on the present value of cash flows. Both types of bonds are assessed using discounted cash flow analysis, where future cash flows (coupon payments for fixed-rate bonds, and principal redemption for zero-coupon bonds) are discounted back to the present value using an appropriate discount rate, typically the yield to maturity or a market interest rate.

For fixed-rate bonds, investors receive periodic interest payments (coupons) along with the return of the principal at maturity, while zero-coupon bonds do not provide regular interest payments; instead, they are issued at a discount and the investor receives the face value at maturity. However, despite these differences in cash flow structure, both are valued by summing the present value of their respective cash flows using the same underlying principle of discounting future cash flows to account for the time value of money.

This commonality in discounting methodologies illustrates a fundamental approach to bond valuation, demonstrating how both types of bonds are treated consistently in terms of their theoretical value in the marketplace.