Skip to main content

How to calculate bond yield when no interests are paid?

Invest in Mutual Funds Online

Download Mutual Fund Application Forms

 
These series differ by two factors – buyback option, and payment of interest.

We looked at the buyback option and how it affects bond yield earlier, and now let's look at payment of interest. One series pays out interest annually, whereas the other series doesn't pay out any interest annually, but rather pays a lump-sum at the end of the time period.

Let's first look at the yield for the series that pays a lump-sum.

You already know what your effective purchase price is, and you also know what you will get at the end of the time period, so all you need to do is to plug in these numbers in the Compounded Annual Growth Rate (CAGR) Calculator and see what the yield is.

Conceptually you are saying that if I start out with Rs. 3,455 (30.9% tax rate) then what is the rate of interest at which I should invest this sum, and also the interest earned every year, so that I reach at the amount at the end – Rs. 7,180 (series 4 example).

Here is how that table looks like.

Investment Amount

Tax Slab

Effective Purchase Price

Series 2 Yield

(CAGR)

Series 4 Yield

(CAGR)

5,000

30.9%

3,455

12.06

15.74

5,000

20.6%

3,970

10.52

12.57

5,000

10.30%

4,485

9.18

9.86

Buyback Amount

———–

——-

10,800

7,180

Time in years

———–

——-

10

5

The post about CAGR also details how it is calculated, so you can read more there.

In future to calculate any bond yield where there are no annual interest payments look for these elements:

  • Face Value
  • Tax Bracket
  • Effective purchase price
  • Time in years
  • Buyback amount

Then use effective purchase rate, time and buyback amount in the CAGR calculator to find out the yield.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

--------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Some of the Top performing Mutual Funds are

  1. HDFC Top 200 Fund
  2. ICICI Prudential Dynamic Plan
  3. DSP BlackRock Top 100 Fund
  4. Birla Sun Life Front Line Equity Fund
  5. Reliance Equity Opportunities Fund
  6. IDFC Premier Equity Fund
  7. SBI Magnum Contra Fund
  8. Sundaram Select Midcap
  9. UTI Dividend Yield Fund

Popular posts from this blog

NRIs and direct taxes code (DTC)

DTC Proposes To Do Away With Special Provision That Allows NRIs Liberalised Duration Of Stay In Country      THE new direct taxes code could bring a large number of global Indians under the tax net, as it does away with a provision that allowed individuals to escape tax in any country citing double tax avoidance.    The new legislation, introduced in Parliament on Monday, says an individual shall be a resident of India in any financial year if he is in the country for more than 59 days in that year, and has been has been India for more 365 days in four preceding financial years. A number of Indian industrialists including Vedanta's Anil Agarwal and Essar's Ravi Ruia have acquired non-resident status over the years.    The DTC has only attempted to clean up the provision in line with the laws globally. A phrase "being outside India" in the existing income tax law exempted individuals who stay outside the country for six months from paying taxes. This was prone ...
Read more

Stick to Good Fund Manager who Can Multiply Your Investment

A manager may be the difference between the best and worst funds. Here's how you can find the right one    Does a mutual fund manager make a difference to your investment? The answer may not be as easy as you think, since most best-performing mutual funds have moved away from individualistic fund management to process-driven methods, limiting the scope of an individual's role in investment decisions. In fact, many fund managers would speak at length about how the "system" their fund house has in place makes their task of picking stocks easy even though it restricts their freedom. Still, the question is important, especially after recent reports that the Securities and Exchange Board of India ( Sebi ) may ask fund managers to disclose to investors their track record of managing money. Let us take a look at the universe of large-cap funds over the past five years. According to Value Research, an independent mutual fund tracking firm, the topper in the category is DSP...
Read more

Tata Fixed Income Portfolio Fund dividend

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)       Tata Mutual Fund has announced dividend under the dividend option of Tata Fixed Income Portfolio Scheme B2 Plan A-DQ, Tata Fixed Income Portfolio Scheme B2 Reg-DQ and Tata Fixed Income Portfolio Scheme B2 Direct-DQ. The record date has been fixed as August 29, 2013. Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C. Invest Tax Saving Mutual Funds Onlin...
Read more

IDFC Classic Equity Fund

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   IDFC Classic Equity Fund IDFC Classic Equity is a large-cap equity fund which currently has assets under management worth Rs. 158.52 crore. It was launched in August 2005. The fund is benchmarked against the BSE-200 Index. Performance YTD 1-Year 3-Year 5-Year Since Inception IDFC Classic Equity 0.93 26.61 6.30 1.01 11.65 BSE 200 1.52 17.31 6.00 1.99 12.98 All figures in % as on January 31, 2013; Returns above one-year in CAGR terms ...
Read more

Mutual Fund Review: HDFC Mid-Cap Opportunities Fund

LAUNCHED in June 2007, HDFC Mid-Cap Opportunities Fund was started as a three year closed-ended scheme. It was subsequently converted into an open-ended scheme in June 2010. The fund has been ranked as Crisil Fund Rank 1 in the small & midcap equity category according to Crisil Mutual Fund Ranking methodology over two of the last four quarters and has been present in the top 30 percentile in the category for all the four quarters. Crisil Mutual Fund Rank 1 funds form the top 10 percentile of the ranked universe representing very good performance vis-à-vis category peers. The fund, managed by Chirag Setalvad, has assets under management of ` 1,275 crore as of April 30, 2011 and has outperformed its peers and the benchmark (CNX Midcap Index) in the 1, 2 and 3 year time frames. INVESTMENT APPROACH The fund's objective is to earn capital appreciation by investing in equities of small and mid cap companies. While these companies have a higher return potential than large cap ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now