Page 73 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes (i) These are issued at the face value.
(ii) The rate of interest and tenure of the security is fixed at the time of issuance and does
not change till maturity.

(iii) The interest payment is made on half yearly rest.
(iv) On maturity the security is redeemed at face value.
(b) Zero coupon bonds: These securities are issued at a discount to the face value and redeemed
at par i.e. they are issued at below face value and redeemed at face value. The salient
features of zero coupon bonds are:
(i) The tenure of these securities is fixed.

(ii) No interest is paid on these securities.
(iii) The return on these securities is a function of time and the discount to face value.
(c) Partly paid stock: In these securities, the payment of principal is made in installments
over a given period of time. The salient features of Partly Paid Stock are:
(i) These types of securities are issued at face value and the principal amount is paid in
installments over a period of time.

(ii) The rate of interest and tenure of the security is fixed at the time of issuance and does
not change till maturity.
(iii) The interest payment is made on half yearly rest.

(iv) These are redeemed at par on maturity.
(d) Floating rate bonds: These types of securities have a variable interest rate, which is
calculated as a fixed percentage over a benchmark rate. The interest rate on these securities
changes in sync with the benchmark rate. The salient features of Floating Rate Bonds are:
(i) These are issued at the face value.
(ii) The interest rate is fixed as a percentage over a predefined benchmark rate. The
benchmark rate may be a bank rate, Treasury bill rate etc.
(iii) The interest payment is made on half yearly rests.
(iv) The security is redeemed at par on maturity, which is fixed.

(e) Capital indexed bonds: These securities carry an interest rate, which is calculated as a fixed
percentage over the wholesale price index. The salient features of Capital Indexed Bonds
are:
(i) These securities are issued at face value.
(ii) The interest rate changes according to the change in the wholesale price index, as the
interest rate is fixed as a percentage over the wholesale price index.
(iii) The maturity of these securities is fixed and the interest is payable on half yearly
rates.

(iv) The principal redemption is linked to the wholesale price index.

Invest in Government Securities

Entities registered in India including banks, financial institutions, primary dealers, partnership
firms, institutions, mutual funds, Foreign Institutional Investors (FIIs), State Governments,

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