security market value are Briefly discussed in this section below. The security market value is important part of Macroeconomics.
It is required to determine the price of a zero-coupon bond with a par value of 1000 rubles, which is issued by an enterprise with a circulation period of 182 days. The market interest rate for bonds of a similar type is 15% per annum. Under these conditions, the bond price will be:
If we buy a bond, wait until maturity and get the bond’s par value, what is the return on investment?
To do this, we need to determine the value of the yield to maturity from this formula:
where rn is the yield to maturity; H — face value of the bond, rubles; P — bond price, rubles; t is the number of days from the purchase date to the bond maturity date; 365 — the number of days in a year.
The first factor (H − P) / P shows the real return that the investor will receive during the period of holding the bond. With the help of the second factor 365 / t, the actually obtained profitability is reduced to the annual dimension.
dimension. The indicator calculated in this way is called the effective return. By purchasing a zero-coupon bond, an investor is not required to hold it until maturity. If he needs funds, he can sell the bond on the secondary market. In this case, the profitability of his investments for the period of bond holding is determined by the formula:
where Pп – bond purchase price; Pпр – bond sale price; tvl is the number of days from the date of purchase to the date of sale.
For example, an investor bought a bond for 87% of the face value, and after 60 days sold it for 93%. Its profitability for the period of bond holding per year was:
There are two indicators of yield on coupon bonds: current (coupon) and full. The current profitability is determined by the formula:
where Cyear is the annual amount of coupon payments; Ptek is the current market price of bonds.
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