BRM,Investing in Bonds Presentation)

8/3/2019 BRM,Investing in Bonds Presentation)

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RESEARCH STUDY PRESENTATION

ON INVESTMENT IN BONDS

BY Group No. 5:

AMIT BEHAL

ARCHIT SINGHALFRIZO JOHN

LUBHANA JUNEJA


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Literature

In finance, a bond is a debt security, in which

the authorized issuer owes the holders a debt

and, depending on the terms of the bond, is

obliged to pay interest (the coupon) and/or to

repay the principal at a later date, termed

maturity. A bond is a formal contract to repay

borrowed money with interest at fixedintervals


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Investments in Bonds

Bonds are purchased directly from the issuingcorporation or through an organized bond exchange.

Bond prices are quoted as a percentage of the face

amount.

A premium or discount on a bond investment is

recorded in a single investment account and is

amortized over the remaining life of the bonds.


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Why should I Invest in bonds?

1. They offer higher returns than bank

accounts.2. They provide fixed interest payments.

3. Can customize your investment choice

depending on return and risk preference.


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Conceptualization

Reference period : 1 year

Type of Investigation : Applied Research

Participants: Corporate people/Working

People


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Information Collection Framework

Selecting Method of data :Primary sources-

getting respondent to answer the

questionnaire.

Scaling Techniques : Quantitative

Sample Selection : People working

corporate/banks.

Sample Size : 20

Type of Sampling : Simple


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What we are studying?

Government Bonds

Public Sector Undertaking Bonds

Pros and Cons of Investing in Bonds

ROI available

Who should go for bonds who should not

Why Banks go for Government Bonds?


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Analyses and Interpretation of Data

30% of the people invest - wealth

preservation

60% primary objective of investing is source

of income

50% of people believe that their income will

increase slightly in the next five years

50% believe that their income will increase

significantly.


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70% invest in PSU bonds,20% in government

bonds and 10% in private sector bonds.

50% of the people think that they will

reinvest between 20% and 80% of their

earnings .

60% people believe that their living expenses

could be safely covered


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40% -mix of equity securities and governmentbonds

Other 40% feel that government bonds aresecure.

20% - equity securities investment is safe interms of risk return trade off.

70% people are concerned with the safety oftheir investment income before choosing aninvestment.


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60%-Risk Neutral Investors

30%-Risk Averse Investors

10%-Risk Lover Investors


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Majority is not experienced when it comes to

investing in bonds.

50% of people said they prefer deposits under

post office .

20% believe that deposits with a banking

company.


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60% of people invest in Floating Rate Bonds

while 40% invest in Zero Coupon Bonds.

70% not familiar with the benefits and nonbenefits of investing in bonds.

75% do not maintain records related to their

purchases and sales of bond-financed assets.


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90% feel Infrastructure Bonds are good to

invest in.

Majority answered long term bonds to invest

in.


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What is Rate of Interest Available?

40% said 7% is the common interest rate

while other 40% said 8-8.5%

Only 20 % said 6%

Example: 8 percent Savings Bond


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CONCLUSIONS


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Bond Market in India

The Bond Market in India with the liberalization

has been transformed completely.

The bond market in India plays an important role

in fund raising for developmental ventures.


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GOVERNMENTBONDS

Government bonds refer to the bonds issued

by the Government or the government

department of a country in its own currency.

The returns depend on the type of the bond!

Some have a fixed rate of interest, say 8%, and

some are linked to the market or the inflation

in the country.


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Public Sector Undertaking Bonds

Medium and long term obligations.

Government share holding is generally greater

than 51%.


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Corporate Bonds

Higher risk but more return.

Offered by private corporations in India for

terms that can last up to 15 years.


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Tax-Savings Bonds

Most of them are issued by India's Reserve

Bank. These five-year bonds are sold at an

interest rate of 6.5 percent and interest is paid

off every half-year.

The upside for the investor is that by

purchasing this bond, they are released from

paying taxes on the related interest income, aslong as they hold the bond until it matures.


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Pros and Cons of Investment In Bonds

Advantages of Investment In Bonds

One of the benefits of investing in bonds is

that they might be a little more secure than

stocks.

Investing in bonds provides a predictable

stream of income.

Diversification => Reducing Risk


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Disadvantages of Investment in Bonds

Most bonds have a call option.

When interest rates go up, the price at which the

bond can be sold goes down.

Long-term bonds can tend to be volatile.

If the issuer of the bond declares bankruptcy, one

may lose his or her money.

Selling bonds before theyre due may result in a

loss.


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BRM,Investing in Bonds Presentation)

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