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

Features and purpose CDs , The distinct features of CDs are: CD is a ...

The distinct features of CDs are: CD is a document of title to a time deposit and is distinct from conventional time deposit with respect to negotiability and marketability.

Financial communications, Financial Communications Also known as inves...

Financial Communications Also known as investor or shareholder relations, this corporate communication sub function moves against from the traditional handling of the finan

Basic concepts of principles of credit analysis, Credit analysis is the fin...

Credit analysis is the financial analysis used for determining the creditworthiness of an issuer using various quantitative and qualitative factors. The four Cs an anal

Strategic management, Develop and implement strategic plan using bounce fit...

Develop and implement strategic plan using bounce fitness as case study

Write down budget constraint - budget line, You have $20 to spend on high q...

You have $20 to spend on high quality pens and low quality pens. High quality pens cost $5 each and low quality pens cost $2 each.    (a) Suppose that you will spend your entire

Assignment, 1. If Robinson wishes to maximize its total market value, would...

1. If Robinson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain. 2. Construct Robinson’s market va

What is bridge financing, Bridge Financing A type of short-term financ...

Bridge Financing A type of short-term financing used to cover an organization short-term want; a loan that is expected to be repaid relatively fast.

Pull strategy, Pull Strategy Pull strategy define a marketing appr...

Pull Strategy Pull strategy define a marketing approach in which a manufacturer promotes a product directly to consumers in the hopes that the consumers will then request

Types of treasury bills, Types of Treasury Bills Treasury bills are iss...

Types of Treasury Bills Treasury bills are issued at various maturities, generally up to one year. Thus, they are useful in managing short-term liquidity. At present, the GOI (

What can financial institution often do for deficit econmic, What can a fin...

What can a financial institution often do for a deficit economic unit (DEU) that it would have difficulty doing for itself if the DEU were to deal directly with an SEU? SEUs us

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