For example, a 10 yr bond (in India) has a coupon of 8%, maturity date of 12-Nov-2020, and Maturity value of INR 10,800. It is trading at 9750 now. How do I compare returns from selling it now versus holding it to maturity, assuming I bought it for INR 5000 during the initial offer period?


You can separate the past from the future in the following way:

It has a value of 9750 now. Anyone who bought it would pay 9750 for it now and get 10800 in roughly a year. That means they get about the 1.107 fold, i. e. it has a profit of about 10%.

The same happens to you if you keep it vs. if you sell it: 9750 now or 10800 in roughly a year? Makes a difference of 10%.

If the coupon is payed annually and not included in the proce of 10,800, you'll additionally get the coupon.

  • Thanks. The coupon is included in the maturity amount. You answer led me to compare XIRR for the two scenarios: It is 8% (as declared) if I hold to maturity and 7.7% if I sell now.
    – ottodidakt
    Nov 26 '19 at 10:35

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