The difference between bonds and bonds
Partnership bonds are considered a type of bond with the difference that these bonds are used to finance construction, production, and service projects and are controlled by the instructions and regulations of the Central Bank, but the bonds do not impose any special restrictions on the issuer and the issuing company can use the capital acquired from Use bonds in any type of investment.
certificate of deposit
A certificate of deposit is a type of security that has a fixed maturity date and fixed interest. The types of deposit certificates are as follows:
Special term deposit certificate for general investment
A special term deposit for a general investor is a deposit that has been opened with a bank with a specified maturity, and the bank issues a certificate with the same name in exchange for it. The term deposit certificate is for general investors with or without a name, and the main conditions of the deposit contract are specified in its details.
Certificate of fixed deposit for special investment
Special investment term deposits are deposits that the bank opens to equip resources and finance new production, construction, and service projects and develop and complete existing profitable projects with a specific maturity, and these bonds are given in exchange for opening a special investment term deposit. Exports.
How to buy debt securities?
The purchase and comparison of debt securities is done on a specific basis, which is the most suitable for investment. As stated in the previous sections, some debt securities do not pay periodic interest and some have interest payments with different payment periods and nominal interest rates. To buy debt securities, the following criteria should be considered :
Annual interest rate (YTM): As you know, the basis for buying and selling stocks is price and performance indicators such as P/E, but the basis for buying and selling debt securities is the annual interest rate (YTM) at the time of purchase. Where To Cash Savings Bonds?
How to calculate the annual effective interest rate
The annual effective interest rate of debt securities is calculated with the principle of money discount (the money deducted from the amount of the bill or promissory note before maturity). Calculating the interest rate for a normal investor is a little complicated, especially in the interest of debt bonds with interim payments, so we will skip the training of the bond annual interest calculation formula here. For more information, you can visit the website www.ifb.ir.
principle of discounting
The discount principle is based on the logic of the time value of money. In other words, the value of a thousand tomans today is more than a thousand tomans tomorrow. For example, when we go to the bank for a deposit, the bank has announced the annual interest, and we will have money according to the amount of our money and the bank interest of the next year, and the amount of 100 million tomans with the bank interest of 15% next year is equal to 115 It will be a million tomans. In the debt market, the nominal price of debt securities (the amount we receive when the bonds mature) is known. The current price of bonds is determined by the amount of supply and demand in the market, but the annual equivalent interest or YTM is unknown, which is calculated by placing it in the formula.
Note: Debt bonds with the highest YTM do not necessarily mean the best investment. In this regard, in addition to the annual equivalent profit, you should also consider the following criteria.
Bond default risk means that the bond issuer will not be able to return the principal and interest at maturity. For this reason, to assess the risk of a bond default, we must pay attention to the bond issuer and guarantor. If the issuer of government bonds, the guarantor will be the government (Treasury and Ministry of Finance). In this case, the risk of default is zero, because the government never goes bankrupt. Islamic treasury bonds and government partnership bonds are also included in this category. But if companies are the issuers of debt bonds, lease bonds, or partnership bonds of large companies and other bonds will be associated with risk because companies are unable to pay debts to bond owners during bankruptcy. In this regard, the guarantor of the company is of great importance, he must be able to pay the principal and interest of the bond owners, so pay attention to the guarantor when buying debt bonds issued by companies.