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

Process of bringing a new international bond issue to market, Discuss the p...

Discuss the process of bringing a new international bond issue to market. Answer:  A borrower desiring to increase funds by issuing Eurobonds to the investing public will conta

Leverage, Evaluate the importance of leverage in financial management of a ...

Evaluate the importance of leverage in financial management of a small scale company

Organization and management of mutual funds, Organization and Management of...

Organization and Management of Mutual Funds: Structural Pattern Mutual Funds, usually formed as trusts, generally involve three parties viz., Settler of the trust or

Convertible bonds, Convertible bonds are the debt instruments issued which ...

Convertible bonds are the debt instruments issued which can be converted after a pre-specified date for a pre-specified number of securities (generally equity stock). I

Show the present value of a single flow, Q. Show the Present Value of a Sin...

Q. Show the Present Value of a Single Flow ? Discounting or else Present Value of a Single Flow (Lump Sum):- We are able to determine the PV of a future cash flow using the for

Advantages of floating rate notes, Advantages of Floating rate notes: W...

Advantages of Floating rate notes: We know that the coupon rate is fixed for fixed rate bonds and that throughout its tenure the investor receives coupons at a predetermined in

Operating cycle, Explain the operating cycle of a vegetable growing busines...

Explain the operating cycle of a vegetable growing business

Evaluate the critical path, a) Definitions of EST and LFT needed in order t...

a) Definitions of EST and LFT needed in order to explain the differentiation between the terms. The EST of each activity will depend on the LFT of all preceding activities. b) S

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