How is the performance of the binding measurement?

Bond is a debt certificate that can be purchased as an investment. The performance of bonds is measured by determining the amount of return the investor receives from the bond compared to the amount he has paid. This measurement, which is also called return, depends on the interest rate, paid by the bond issuer and the nominal value of the bond, which is the amount of the principal that the investor receives on the bond. Simply the division of interest received by the nominal value will provide a percentage that is equivalent to the bond yield. However, it is important to note that bonds are not always traded for nominal value, so the actual purchase price will also affect the performance of bonds. When the investor buys a bond, he basically provides a loan to the issuer of bonds, which can be any institution, from government to society and seeks to raise funds. In return, the issuer returns with regular interest payments and finally pays the principal at the end of the bond term. Investors are trying to measure the performance of bonds so that they canChoose those that best suit their investment needs.

The basic equations for measuring the performance of bonds, also called bond yields, requires the distribution of total interest payments on the nominal value of the bond. Imagine, for example, that a bond holder receives $ 200 (USD) in interest for a bond that has a nominal value, also called nominal value, $ 1,000. The $ 200 distribution of $ 1,000 brings $ 0.20 or 20 percent. Investors should realize that the level of the coupon of this bond is also 20 percent, because bond yields will always be equal to the coupon rate when bonds are purchased at nominal value.

However, the performance of bond performance is rarely so simple, because bonds are often purchased at the price other than the CE fare. In these cases, the bond yield moves inverse towards the price of the bond. For example, a bond purchased Při lower than the nominal value would have a higher yield, while one purchased at an excessive nominal value would have a lower yield.

This dichotomy in bond performance means that the perception of the value of bonds depends on the location of the investor. Someone who holds the bond does not mind that the price is rising because the coupon remains the same and higher price means that the bond is more worthwhile if the investor decides to sell. On the other hand, those who want to buy a bond will probably look for bonds with lower prices and higher returns.