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treasury bills popularly known as t-bills are issued in india by the rbi on behalf of the government of india t-bills are short-term
illustration the monthly yield of a mortgage backed security is 075 find out the annual yield for this securitysolutionannual
normally the cash flows from mortgage backed and assets-backed securities are obtained on monthly basis therefore the yield calculated
in structured products like mortgage-backed and assets-backed securities the cash flows include both principal repayment and interest the
now we can calculate the yield for each possible call or put date in addition we can also calculate the yield to maturity the lowest
yield to put is the rate at which the present value of cash flow to the first put date is equal to the price plus interest
other than zero coupon bonds all fixed income securities make periodic payments in the form of coupon interest this coupon
an investor can receive income from this source when the bonds purchased at discount are held up to maturity or when he sells
an investor receives periodic interest payments at specified intervals till the date of holding or maturity however the
when an investor invests in fixed income securities he receives returns from one or more of the following sourcescoupon
interest rate risk is the risk wherein the investor in bonds faces the risk of a fall in his bond price as and when there is
expected volatility is a major factor that affects the value of an option expected volatility of an option on bond is referred to as
a bond whose payments are made in foreign currency has unknown cash flows in domestic currency this is because the cash flows are
liquidity risk tends to change as and when there exists a change in the spread between the bid and the ask price market liquidity change
an investor who wants to sell a bond even before it reaches its maturity date would be concerned as to whether he will receive a price
market participants measure the default risk of an issue on the basis of the credit ratings that the credit rating agencies assign to the
a credit spread refers to the difference in interest rate between a corporate bond and a comparable maturity government bond suppose
default risk is the risk that arises when the issuer is not able to satisfy the terms and conditions of the obligation with
a bond investor is always exposed to credit risk credit risks can be classified into three types they aredefault riskcredit spread
reinvestment risk is the risk involved in reinvesting the proceeds received from the issuer against callable bonds during falling interest
the graphical representation of the relationship between yield and maturity is known as yield curve yield curve risk is the risk of
in a fixed-rate coupon bond the change in the price can be attributed to the change in the market interest rates this change is due to
different bonds trade at different yields though the coupon rate maturity and embedded options are same for them assuming that all the
various bond features largely affect the degree of correlation between the bonds prices and the bonds interest rates some of
bonds are usually recognized by yields which change from time to time owing to many market forces there exists an inverse relationship