What is the connection between the current yield and the proceeds for maturity?
The calculation of the current income and the due date of the investment in the bond or other fixed income tool tells the investor whether the bond is sold in time or holds it until it disappears. Both calculations inform the investor's return on investment at specific time points. If the yield to maturity is less than the current return, the bond would be sold at a price that is greater than its nominal value. In this case, the investor might want to sell the investment rather than hold it. On the contrary, the investor would probably want to hold a bond with a revenue for maturity, which is greater than the income at present.
bonds are borrowing tools that corporations, government and some other entities give them to get money. Unlike shares, bonds pay a fixed amount of interest, while the bond is outstanding and must be repaid in full at the end of the loan period. The date on which the bond must be repaid is the date of maturity.
Investment return on bonds is not just a question of how much interest Plath for life loan. Although the bonds have a nominal value or how much the issuing entity repays when the bond is redeemed in its maturity, they are rarely sold for this amount. Bonds are usually sold with a discount or bonus, which means they sell for less than or more than their nominal value.
Calculation of the current return determines the annual rate of return on binding. The proceeds to the maturity shall calculate the return rate if the binding has been held to the maturity. The evaluation of the current return and income to maturity allows the investor to determine the best investment procedure. This analysis takes into account whether the bond has been purchased with a discount or a bonus and whether it can be sold with a discount or bonus.
differences in the bond selling price of the bond compared to its face VALUE Make a comparison of the current return and revenue to maturity, particularly bright. A bond that is now selling at a price that is much lower than its nominal value means that the person holding it in a repaymentOtosti, gets another payment. He receives a nominal value, even if he paid less for buying a bond. This additional advantage becomes part of the return on investment if it is held to maturity.
On the contrary, the current return and yield of maturity analysis may support the decision to sell the investment if the holder can sell it for a bonus or more than a nominal value. In this case, the possible current return would have to be considered as a loss of the investor if the bond was held to maturity. The issuing entity will pay only the nominal value of the bond in maturity to the investor, although he could sell for more money in the past.