Prices and yields, Financial Management

Assignment Help:

Prices and Yields

The face value of the government security is Rs.100 or Rs.1,000. Earlier, that is, before 1950s the government bonds were issued at a discount. There was no fixed relation between the maturity pattern and the discount offered. A discount was availed from the state government securities due to the great need for the funds. The minimum price of issue being 97 percent, the majority of the issues by the state government securities were below par. But after the 1980s all the issues were being made at par. Only in one instance, that is, in 1980 the bonds were issued above the par.

The coupon rate or the bond rate is the interest rate mentioned on the bond, and paid on its face value. If the value on issue and redemption are the same, the coupon rate is equal to the redemption yield. The redemption yield would be higher than the bond rate when the investor purchases the bond at a value lesser than the face value or the bond rate, that is, at a discount. Running yield is obtained by correlating the market price of the bond with the bond rate and the discount or premium. The redemption yield represents the return available to the investor if he retains the bond till maturity and the running yield is the return available when the investor sells it in the secondary market at the current price.

 


Related Discussions:- Prices and yields

Compounded value of a series of cash flows, Compounded Value of a Series of...

Compounded Value of a Series of Cash Flows: - We have considered merely single payment made once as well as its accumulation effect. An investor possibly interested in investing mo

Describe working capital decision, Q. Describe Working Capital Decision? ...

Q. Describe Working Capital Decision? Working Capital Decision: - It is anxious with the management of current assets. It is a significant function of financial management. Cur

Role of financial intermediaries in the financial system, Role of Financial...

Role of Financial Intermediaries in the financial system: Having designed the instrument, the issuer should then ensure that these financial assets reach the ultimate investor

Describes net operating income approach to capital structure, Q. Describes ...

Q. Describes Net Operating Income Approach to Capital Structure? NOI (Net Operating Income Approach):- This is another speculation of capital structure which is propounded by '

Dividends paper, one page paper reviewing "the Morgan Stanley Oil and Gas R...

one page paper reviewing "the Morgan Stanley Oil and Gas Report"

Analyse financial statements - strength of business, Learning outcome to be...

Learning outcome to be assessed: analyse financial statements to make decisions on the strength and adaptability of a business. A numerical analysis of the financial statements of

IRR, WHAT IS METHOD FOR FINDING IRR

WHAT IS METHOD FOR FINDING IRR

Ranking conflict net present value & internal rate of return, Explain how t...

Explain how to resolve a "ranking conflict" between the net present value and the internal rate of return.  Why should the conflict be resolved as you explained? Whenever there

How many types of segments in the mutual fund industry, How many types of s...

How many types of segments in the mutual fund industry? There are two segments into the mutual fund industry: long-term funds and short-term funds. In Long-term funds bond fund

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd