Collectors’ Pack, a solution for all

There always is a problem for the new collectors with identification of themes. Even if the themes are known it becomes difficult to find the older stamps and theme is incomplete. There is a solution to this i.e. start collecting the collectors’ pack which is issued yearly by the India Post. This pack includes all the stamps which were issued in a particular year. As this is a collection of a full year, it is comparatively easy to liquidate and it is a good investment opportunity. These packs are not costlier and worth collecting for those who just want to start with philately or for those who doesn’t want to go with any particular theme. Here are some indicative images for you:

A 2008-collector’s pack-By India Post has total numbers of Stamps Issued:-79 and sale Price Rs:-650/-

Source:www.indianstampghar.com

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Bond Duration Analysis

What is Duration of the bond?

The very first thing to remember is, duration of the bond is not maturity of the bond as both are different.

• Duration is defined as a weighted average of the maturities of the individual payments
• It is a measurement of how long, in years, it takes for the price of a bond to be repaid by its internal cash flows
• It is an important measure for investors to consider, as bonds with higher durations carry more risk and have higher price volatility than bonds with lower durations
• Duration is also a point where the investor faces no interest rate risk

Terminology:

Zero coupon Bond: Issued at discount to face value and redeemed at par. Does not pay any interest

Vanilla bond/Straight: A normal interest bearing bond

 

Macaulay Duration:
The formula usually used to calculate a bond’s basic duration is the Macaulay duration

Where,

n = number of cash flows
t = time to maturity
C = cash flow
r = required yield (YTM)
M = maturity (par) value

Alternate Equation:

Lets understand the same with an illustration:

Consider a 12.5% bond with annual coupons, redeemable after 5 years at a premium of 5%. If the current interest rate is 15%, calculate duration of the bond.

Hence Duration of the bond = 375.11/94.11 = 3.99 Years

Remember duration of a zero coupon bond is equal to its maturity.

Duration and Bond Characteristics:

 

•   The lower the coupon, the higher the duration.

•   The higher the coupon, the lower the duration.

•   The longer the term to maturity, the higher the duration.

•   The shorter the term to maturity, the lower the duration.

•   The smaller the duration, the smaller the price volatility of the bond.

•   The greater the duration, the greater the price volatility of the bond.