SAIM2220 - Interest: specific inclusions: discounts
Discounts and premiums
Paying interest is only one way in which a borrower may 바카라 사이트˜reward바카라 사이트™ a lender. Debt securities, such as government or corporate bonds, may be issued at a discount. For example, a 5-year bond may have a nominal value of £1,000, but be issued for £800. When the investor redeems the bond at maturity, he or she will receive £1,000 - the £200 profit, or 바카라 사이트˜original issue discount바카라 사이트™, represents the investor바카라 사이트™s reward for lending. A security that is issued at a discount may carry interest as well, or it may be interest-free (a zero coupon bond).
A third way of rewarding an investor is by redeeming the security at a premium. The nominal value of the security is, say, £800, and any interest is calculated on a principal amount of £800, but when the security matures the investor will get back (say) £1,000.
But many investors will - rather than subscribing for a security and then holding it to maturity - buy and sell securities in the market. The difference between the purchase price and the face value of the security is called 바카라 사이트˜market discount바카라 사이트™.