How to determine the yield of a bond

Instruction
Estimate the coupon yield on the bond. It consists of periodic payments in the form of permanent payments for a certain number of years. The amount of coupon income is determined by the financial reliability of the organization that issued the security. The higher the reliability of the issuing organization, the lower the percentage. Coupon payments can have a fixed rate, can be indexed or paid together with the principal amount at maturity of a bond.
Assess the opportunity to receive income from changes in the value of the bond. Such a return on a bond is the difference between the purchase price and the sale price for a certain period. This type of income makes sense if you purchase a bond with a discount (at a price below the nominal).
Consider earning income from reinvesting interest earned on a bond. This type of income matters if you expect to purchase long-term bonds.
For an accurate estimate of the profitability of a bond, use a relative indicator that expresses income per unit of cost. Distinguish between current and finalyieldon bonds.
Calculate the currentyieldbonds, which reflects the current annual income on a security in relation to the cost of its acquisition. The calculation is carried out according to the following formula: D1 = (C1 + K) * 100%; where D1 is the currentyield;
C1 - the amount of income;
K - bond purchase rate.
Calculate the finalyieldwhich takes into account the change in the value of the bond. D2 = ((C2 + D) / (K * T)) * 100%; where
D2 - completeyieldbonds;
C2 - the amount of total income,
D - discount, i.e. change in the value of the bond;
K - bond purchase rate,
T - the period of ownership of the bond (number of years).


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