Bond maturity query


Suppose I buy a bond at ₹800 for which the face value is ₹1000. And it matures in like 6 months. So in this case would I receive ₹1000 in the end as the principal of the bond and make a ₹200 profit…?


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Yes, theoretically you will make 200 rs profit but ideally under normal market conditions bond won’t be available at 800 because YTM itself would be 40% excluding coupon unless it is a junk bond which come with default risk, so it is not guaranteed after expiry bond will pay you in full.

Hi Siva, Thanks for the response. Sorry I didnt understand what is meant by “YTM itself would be 40%”

And is it possible the government bonds being in unpaid state after expiry…?

YTM means yield to maturity, yield one will receive if bought and hold till expiry, in above case for 6 months it is 20% and for annual basis it is 40% excluding coupon payment if any, govt bond yields would be little higher than Interest rates prevailing at that time so no investment grade bond can’t yield that much return. You can read more about bonds before trading in them. Also can refer this as a start.

Indian government bond current credit status is stable so most likely Indian govt bonds won’t default.

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Thank you very much for the information :slight_smile: