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

Show the net operating income approach, Q. Show the Net Operating Income ap...

Q. Show the Net Operating Income approach ? The NOI (Net Operating Income) approach advocates that the cost of equity increases with the increase in the financial leverage. Thi

Scope of finance functions, SCOPE OF FINANCE FUNCTIONS The functions of...

SCOPE OF FINANCE FUNCTIONS The functions of Financial Manager can generally be sub-divided into two: The Routine functions and the Managerial Functions. Managerial Finance F

Calculate most profitable investment, TC  Shipping Ltd has decided to purch...

TC  Shipping Ltd has decided to purchase a machine to augment the company's installed capacity to meet the growing demand for its products. There are three machines under considera

Show external business risk, Q. Show External business risk? External r...

Q. Show External business risk? External risk is the result of operating conditions imposed on the firm by circumstances beyond its control. The external environments in which

How much your investments will be worth at retirement time, Suppose you are...

Suppose you are planning to make regular contributions in equal payments to an investment fund for your retirement. Which formula would you use to figure out how much your investme

Management information system, Explain the challenges before an E-business ...

Explain the challenges before an E-business management

Explain rate of the stock turnover, Q. Explain Rate of the stock turnover? ...

Q. Explain Rate of the stock turnover? Rate of the stock turnover: this is high degree of the inverse co relation between the quantum of the working capital requirement and the

Establish ground rules for the study and design phases, Question : One ...

Question : One activity of the study phase is: "Establish Ground Rules for the Study and Design Phases". (a) What are ground rules? (b) When developing ground rules for a

What is estimate of stock, Stock A has settled into a constant dividend gro...

Stock A has settled into a constant dividend growth pattern of 6 percent per year. The current dividend is $1.50, its current price is $15.90. You are an analyst and believe that

Calculation of a firms sales returns, a) The combined two-firm concentratio...

a) The combined two-firm concentration ratio of Motorola (approximately 17.5%) and Nokia (35%) is around 52.5% of the market. b) Up to 2 marks for correct definition: Market sha

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