Valuation Of Fixed Income Securities Or Valuation Of Bonds Introduction - Security Analysis and Investment Management

Valuation of Fixed Income Securities

Fixed income financial instruments which, traditionally, have been identified as a long-term source of funds for a corporate enterprise are the cherished conduit for investor’s money. An assured return and high interest rate are responsible for the preference of bonds over equities. The year 1996-97 witnessed hectic trading in the debt market, as resource mobilization reached a record level of almost Rs. 25,000 crores which was much above the equity segment. In the first seven months of the fiscal year 1998-99, the funds mobilized by ICICI (Four debt issues) and IDBI have accounted for 90 per cent of Rs. 3,175 crores mopped in the primary market. Financial institutions, banks and corporate bodies are offering attractive bonds like retirement bonds, education bonds, deep discount bonds, encash bonds, money multiplier bonds and index bonds. Knowing how to value fixed income securities (bonds) is important both for investors and managers. Such knowledge is helpful to the former in deciding whether they should buy or sell or hold securities at prices prevailing in the market.

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