| What you need to enter |
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Face value: The par value of the security. (The issue price may be at a discount or a premium to the par value). |
Purchase price: The price at which the investor purchases the government security. |
Maturity: The number of years after which the instrument is redeemed. |
Coupon rate: Every government security carries a coupon rate also called as interest rate, which is fixed. e.g. 12.00% GOI 2008 where 12.00% is the coupon rate payable on the face value which is maturing in the year 2008. |
Change in Interest Rate: By how much do you expect the interest rate to change, expressed as a %. |
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| Results to expect |
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Yield to Maturity (YTM): Yield to maturity is the discount rate that equates present value of all the cash inflows to the cost price of the government security or bond. This is actually the Internal Rate of Return (IRR) of the government security or bond. |
Current yield: Current yield is the return on the government security or bond depending on its purchase price. |
Impact on Price if interest rates rise: The decline in the value of the bond if interest rates were to increase. |
Impact on Price if interest rates decline: The increase in the value of the bond if interest rates were to decrease. |
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