Terms & Definitions
What is the difference between Face Value and Investment Amount?
The Face Value of a bond refers to the predetermined amount at which the issuer will redeem the bond at its maturity. On the other hand, the Investment Amount represents the minimum sum required to purchase a bond, as set by the issuer. In essence, ...
What is the difference between Coupon rate and Yield?
The Coupon Rate represents the fixed annual interest rate a bond pays based on its face value. In contrast, Yield refers to the total return an investor can expect from a bond, considering its price, coupon payments, and maturity. Yield accounts for ...
What is ICCL and NSCCL?
National Securities Clearing Corporation Ltd (NSCCL) and Indian Clearing Corporation Ltd (ICCL) are settlement bodies regulated by SEBI. These are clearing corporations to settle the trade to eliminate counterparty settlement risk. It is advisable to ...
What are the Primary Market and Secondary Market?
Primary Market: This is where new bonds are issued and sold for the first time by the issuer, be it a government or a corporation. Investors purchase these bonds directly from the issuer. In the primary market, the issuer receives the proceeds from ...
What is the Discounted Price and the Premium Price?
When a bond is traded in the market, its price can diverge from its par value (the value at which it was originally issued by the issuer). Discounted Price: If the bond's market price falls below its par value, it is said to be trading at a ...
What are the differences between Secured Bonds and Unsecured Bonds?
Secured Bonds: These bonds are backed by specific collateral provided by the issuer, such as assets or future cash flows. In case of default, bondholders have a claim on these pledged assets or income streams. This collateral provides a level of ...
What are the differences between Senior Bonds and Subordinates Bonds?
Senior Bonds: These bonds hold a higher position in the hierarchy of payment during liquidation or bankruptcy of the bond issuer. In such scenarios, senior bondholders are prioritized over subordinate or junior bondholders for repayment. They are ...
What is the difference between YTC, YTM, and Coupon?
YTC (Yield to Call): YTC refers to the yield an investor would receive if a callable bond is held until its call date, considering the bond's market price and the call price. Callable bonds give the issuer the option to redeem the bonds before the ...
What is accrued interest? Does the settlement amount include accrued interest in it?
Accrued interest refers to the interest that has accumulated on a bond since the last interest payment date. When a bondholder sells a bond between interest payment dates, they're entitled to receive the interest that has accrued from the last ...