discount bonds
A common type of bonds - bonds of companies. The attractiveness of these (as, indeed, other) bonds is that they, unlike the shares may be sold at an issue price (issue rate) is lower than their nominal value (nominal rate), for example, for $ 98 instead of $ 100. This discount is called disagio. In addition, it may be agreed that the bonds would be held not rated, but at a higher rate, for example, $ 103 instead of $ 100. Thus, a premium or premiums, which corresponds to the period when the bonds presented as additional income (together with interest).
The total income (interest and premiums or disagio) bonds is an important measure in assessing the conditions of the bond. In most cases, investors buy these securities at a rate other than the specified voltage. According to the income and nominal interest rate on the bonds can vary significantly.
Suppose at par for $ 100 bought an 8% I bonds maturing in five years. Its yield is $ 8.
(Ie, 8% of $ 100). Suppose further that the same bond purchased with disagio for 95, not $ 100. Income will be the same - $ 8. Increase or decrease the amount to $ 8. (Percent) + $ 1. (Annual increase) = $ 9. Note, however, that the above methods are used only to derive estimated yield.
Under the discount (discount bonds) are commonly understood bonds that income to their owner is formed by the difference between the price at which the bond is paid off, and the price at which it is sold by the issuer. For example, the issuer issues bonds with par value of $ 1000 on the terms of discount for 6 months. This means that, after 6 months from the date of issue of the bond at maturity, he will pay to the owner $ 1000. Since the bonds are issued at a discount terms, the issuer informs both the price at which it is sold - for example $ 950. Thus, the investor purchases a bond for $ 950 and at maturity will receive $ 1,000 for it., That is, his income for six months will be $ 50 (1000 - 950 = 50), or 10%.
