Important Points for IC 99 - Asset Management Exam
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Types of bonds include : Government bonds, Corporate bonds, Debentures, Zero coupon bonds, Callable bonds, Convertible bonds, Fixed rate bonds, Floating rate bonds
Yield to maturity (YTM), current yield and the coupon yield are three different yields that are used to evaluate a bond : i. Yield to maturity means the current yield and the capital gain or loss you can expect if you hold the bond to maturity.
ii. Coupon yield is the annual payment of interest expressed as a percentage of the bonds face value, iii. Current yield is the annual interest payment calculated as a percentage of the bonds current market price.
Bond valuation is the determination of the fair price or intrinsic value of a bond. Bond valuation is finding out of the present value of the bonds future interest payments and the bonds value upon maturity, also known as its face value or par value.
Derivative is a financial instrument, or contract, between two parties that derive its value from some other underlying asset or underlying reference price, interest rate, or index.
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