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Bonds & Fixed Income

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Bonds & Fixed Income

Perpetual Bond

A bond with no maturity date, paying interest indefinitely unless the issuer exercises a call option.

Price = Annual Coupon / Required Yield, for a perpetual stream with no redemption ₹ Bonds & Fixed Income

Primary Dealer

An institution authorised by the Reserve Bank to underwrite and make markets in government securities.

Test: the entity holds a Reserve Bank authorisation, bids in primary auctions and quotes two-way prices in the secondary market qualitative Bonds & Fixed Income

Principal

The face amount a bond issuer borrows and must repay at maturity, on which interest is calculated.

Coupon Payment = Principal x Coupon Rate / Number of Payments per Year ₹ Bonds & Fixed Income

Puttable Bond

A bond the holder may sell back to the issuer before maturity, at a stated price on stated dates.

Test: the terms give the holder an option to require early redemption at a specified price and date qualitative