If you have read through the earlier blog post on No credit risk funds, then it begs a question for you to solve, as a learning opportunity.
You have come across the section, where the bonds are available at 10.25% coupon rate. You can buy these bonds at Rs 1300 a piece. The original issue price is Rs. 1000.
The question to you is what’s your yield for this investment? 10.25% or something else?
Write back to me with your thoughts and comments and we can compare notes.
Safety over returns
I discovered a related note on falling yields and double digit returns. Arvind Chari of Quantum Advisors has struck a cautious note (once again, rightly) about how you should choose safety over returns.
And he makes a very convincing point. Do read this article by him.
He has been saying the same thing for a couple of years now. Here is his previous year interview with Unovest.
Let’s do a WILL Party
One of the most overlooked aspects in financial lives is creation of a WILL. Monika Halan of LiveMint gives this wonderful account of how creation of WILL should be a matter of celebration and not something to be looked away from.
Yes, make a WILL and do a party. Read her account here.
That would be definitely lower than 10.25%, but the actual yield will depend on the bond maturity.