Prices and yields, Financial Management

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.

 

Posted Date: 9/10/2012 7:40:22 AM | Location : United States







Related Discussions:- Prices and yields, Assignment Help, Ask Question on Prices and yields, Get Answer, Expert's Help, Prices and yields Discussions

Write discussion on Prices and yields
Your posts are moderated
Related Questions
Suppose the government regulates the price of a good to be no lower than some minimum level. Can such a minimum price make producers as a whole worse off?  Explain. As a higher

what are the types of non-statuary reports?

Debt holders versus Shareholders A second agency problem arises because of potential conflict between stockholders and creditors. Creditors lend finances to the firm at rates w

Question: Part A  The financial system is complex in structure and function throughout the world. There are many different types of institutions: banks, insurance compani

The process of valuing a callable bond is similar to that of an option-free bond, except for one thing - when the call option may be exercised b

Q. Location of lifting anchors in precast concrete units? It is desirable that position of anchors be located symmetrical to the centre of gravity of precast concrete units. Or

International Finance Problem Analyze the attached case, along the lines indicated by the Assignment questions listed at the end of the case.  Since you will have plenty of tim

Ask questionSally Thomson #Minimum 100 words accepted#

Project Budgets and Reporting Systems: In many cases, where a project is initiated and a budget allocated, a separate account is created to ensure costs attributable to that pr

Ask questiSuggestion regarding Credit limit. Should it be approved or not, what should be the amount of credit limit that electronics give to Booth Plastics.