Types of government stocks, Financial Management

Types of Government Stocks

Issue of Stock through AuctionThe RBI, on behalf of the government, issues notification to auction government securities, stating the amount and time. An applicant may submit more than one bid at different yields through separate applications for each bid. The aggregate amount of bids submitted by a person should not exceed the aggregate amount of Government Stock offered for sale. (The format of application form is given in the Appendix.) On the basis of the bids received, the Reserve Bank of India will determine the cut-off rate of yield at which offers to purchase the Government Stock will be accepted at the auction depending upon the notified amount. The coupon of the stock is decided in an auction. The successful bids offered at the cut-off rate of yield as determined by the RBI will be accepted at par. Other bids tendered at rates lower than the cut-off rate of yield determined by the RBI will be accepted at cut-off rates as quoted in the bid. The bidders will be issued these securities at a premium which will be determined in such a way that yield-to-maturity to the bidder will be equal to the rates at which they have put in their funds in the Government Securities. Bids quoted at rates higher than the cut-off rate of yield determined by the RBI will be rejected. The stock carries the same coupon till maturity.

Issue of Stock with Pre-announced Coupon Rates. 

The RBI also announces the coupon on stock before the date of floatation and the stock is issued at par. The interested bidders need to submit the application form to RBI (format of application is given in Appendix II). If the total subscription exceeds the aggregate amount offered for sale in respect of a fixed coupon stock, the RBI will make a partial allotment to all the applicants.

Stock with Variable Coupon Rates, viz., Floating Rate Bonds, etc.

In case of floating rate bonds, the stock will carry a coupon rate which will vary according to the change in the Base Rate to which it is related. The description of the Base Rate and the manner in which the coupon rate is linked to the Base Rate, floor and cap to the rate, if any, will be announced by RBI at the time of issue. The procedure for issuance is similar to that of pre-announced coupon rates.

 

Posted Date: 9/10/2012 7:37:42 AM | Location : United States







Related Discussions:- Types of government stocks, Assignment Help, Ask Question on Types of government stocks, Get Answer, Expert's Help, Types of government stocks Discussions

Write discussion on Types of government stocks
Your posts are moderated
Related Questions
Explain how a country can run an overall balance of payments deficit or surplus. Answer:  A country can run a whole BOP (balance of payments) deficit or surplus by engaging in th

Alpha and Beta Companies can borrow at the subsequent rates.                                                            Alpha               Beta Moody's credit rating

What is the primary assumption behind the experience approach to forecasting? The experience act to forecasting is based on the assumption that things will happen a certain way

Saven Travel Corporation is considering several investment opportunities in order to diversify its operations. Mr. Saven, president, is trying to determine the firm''s cost of capi

Banks like to make short-term, self-liquidating loans to businesses.  Why? Banks like can see where the funds are likely to come from such that the borrower is able to use to m

WHY ORDINARY SHARES DIFFER IN DIFFERENT COMPANIES

DISSCUSS THE APPLICABILITY OF AN OPERATING CYCLE IN A VEGETABLE GROWING BUSINESS IN UGANDA?

Aquaman stock has exhibited a standard deviation in returns of 0.7, whereas Green Lantern stock has exhibited a standard deviation of 0.8. The correlation coefficient between the

Q. Define Arbitrage Process ? The basic theory of the MM approach if we ignore the taxes is that the total value of a firm should be constant irrespective of the degree of leve

You have been to carry out the following work: To provide a financial analysis and interpretation of one London stock Exchange registered company. The senior Partner has