What is a discount?
discount is the amount of yield that is obtained above and above a specific reference rate associated with some type of security with movable floating. The actual amount of margin depends on the price of security on a certain date and how this price is compared to the reference rate. The screening of the discount range throughout the life of the notes with a movable rate or security is useful for investors because it determines adequate expectations for the amount of return, which is obtained from the sales point to the due date.
Depending on the current state of security price, the discount range may start with zero and increase from this point. Only in very unusual circumstances would the margins be reduced into a negative figure. This is especially true for bonds that often ensure that even if the investor does not earn money from the investment, he or she at least restores the amount of the original purchase of the bond issue.
The discount may be zero if the current price is the same as the reference rate. This basically means that up toAt this point, the asset did not earn anything beyond the expected growth rate. It is not unusual for security with a movable rate to experience this phenomenon at the beginning of the life of the asset. Over time, there are more opportunities for the discount margin to deviate from the reference rate, as the price of security is starting to move upwards.
It is important to realize that the movement of the price of floating or floating security affects the amount of discount margin. This means that there may be a period of time during life of security. If events are held that will reduce the price of the float after the period of increase, the discount will be adjusted accordingly.
Investors are considering a discount rate in an evaluation of the floating rate. By allowing the probability that the rate will change throughout the life of security, it is possible to determine what is considered to be the most likely progress of the price of security. It should be more than this established standard or link, then the increase in the discount range increases. InvestmentThe steers often look for signs that the upcoming market trends can trigger this type of reaction, which allows you to make more money from the investment than originally expected.