Abstract

This concept note examines the decisions involved while investing in bonds by individual investors. Apart from yield-to-maturity (YTM), other parameters that merit attention for making investments in bonds include safety, liquidity and tax implications. The note with the examples of NABARD’s Bhavishya Nirman Bond and ICICI’s Regular Income Bond explains the method to calculate YTM. It also examines the impact of taxes on the net returns earned by the investors of these bonds. The objective of this note is to make readers understand the steps involved in calculating YTM of bonds and study how taxes can impact returns for the bond investors. This concept note is designed for students of Finance curriculum and can be discussed with the chapter on fixed income securities. It can also be discussed in a training program for executives employed in Financial Services companies.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• 0

Keywords

Fixed Income Instruments, Yield-to-Maturity, NABARD, ICICI Bank Limited, IDBI Bank Limited, Bhavishya Nirman Bond, Regular Income Bond, Deep Discount Bond, Zero Coupon Bond, Capital Gains Bond Scheme, Rural Infrastructure Development Fund, Infrastructure Bonds, YTM Calculation, Capital Gains Tax, Post Tax Returns, Risk Profile of Bonds, Credit Rating, CRISIL, ICRA, CARE, Interest Income