Yield, Financial Management

Yield

Yield represents the actual return on the investments. Different types of yield are discussed below:

Coupon Yield: The fixed interest rate on a government security or bond is called coupon yield. For example, 12.00% GOI 2008 implies that 12.00% is the coupon yield. Change in the interest rates, inflation rate or any other economic factor will not be represented by this yield.

Current Yield: Current yield is the present return available on the government security or bond based on its purchase price. It is the ratio of annual interest payment to the current market price. This can be explained with an example; ‘X' has purchased 12.00% GOI 2008 at Rs.100 and ‘Y' purchased the same instrument at Rs.110. The current yield of ‘X' = 12.00%, the current yield of ‘Y' will be 10.91%.

Yield to Maturity (YTM): Yield to maturity is the rate at which all the future cash inflows of the bond have to be discounted to equate the cost price of the bond. This can also be termed as the Internal Rate of Return (IRR) of the government security or bond.

These securities are essentially fixed income securities. They are mostly issued in the form of coupon bearing securities where the coupon may be determined by RBI or the market. At times they are also issued in the form of zero coupon securities and floating rate securities. The yield on these securities consists of coupon income and redemption yield. The coupon income is paid half-yearly in case of coupon bearing securities to the holder. The redemption yield is return on investment from discounted cash flows up to redemption. Table below shows the weighted average coupon rates on GOI securities during the period 1997-98 to 2006-07.

 

Posted Date: 9/10/2012 7:35:17 AM | Location : United States







Related Discussions:- Yield, Assignment Help, Ask Question on Yield, Get Answer, Expert's Help, Yield Discussions

Write discussion on Yield
Your posts are moderated
Related Questions
Do you guys provide Profitability Index Method assignment help? I need writing a report on Profitability Index Method and it is about 2000 words. Let me know. I need to buy your so

Q. Evaluate Certainty Equivalent Coefficient? Illustration: - Presume the risky cash flow is Rs. 200000 and the riskless cash flow is Rs. 140000. The Certainty Equivalent Co

annual uasage of stock 100,000units carrying cost per unit of stock RM2 order cost RM250 question there is a constraint arising from the floor space of the

What is nondiversifiable risk? How is it measured? But for the returns of one-half the assets in a portfolio are flawlessly negatively correlated with the other half-which is e

Illustrate the capital markets in maturity of the securities? On the basis of the maturity of the securities traded, capital markets can be introduced here: Capital markets

Q. Show the benefits of JIT? Additionally to a higher price and quicker settlement by its major customer such a JIT agreement offers several benefits to the supplier of goods.

1. Which of the following statements concerning the cash flow production cycle is true? a) The profits reported in a given time period equal the cash flows generated. b) A company’

Changes in the bond value is inversely related to the change in the interest rates. If an investor holds a long bond position, he would incur loss if the in

Explain the Efficient Capital Market and Capital Structure Theories? Briefly Explain the following expressions: (1) Efficient Capital Market, (2) Capital Structure Theori

How do we estimate expected incremental cash flows for a proposed capital budgeting project? We valuate expected incremental cash flows for a proposed project by valuating the