R3M Debenture: Issue and Trading Details for Reserve Bank Nominal Value

  • Thread starter Lungi Mchunu
  • Start date
In summary, the given conversation discusses a financial instrument with a nominal value of R3 000 000 and an interest rate of 9,25%. It also mentions the trading of the instrument at a reduced interest rate of 8,50% and calculates the number of days between various dates. The conversation concludes with a request for help in understanding the concept, clarifying that it is not a mathematics problem but rather a finance or accountancy problem.
  • #1
Lungi Mchunu
2
0
Nominal Value: R3 000 000
Issue Date: 1 January 2006
Expiry Date: 30 June 2006
Interest Rate: 9,25%

On 25 February this instrument trades at an interest of 8,50%. The number of days from 1 Jan 2006 to 25 February is 55 days, from 25 February to 30 June is 125 days and from 1 Jan 2006 to 30 June 2006 there are 180 days. What is the consideration in the secondary market?
PLEASE HELP!
 
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  • #2
This is NOT a mathematics problem! Once you know the definitions of all those terms, and the basic formulas, which are really Economics, the only math involved is arithmetic.
 
  • #3
Thanks!
 
  • #4
HallsofIvy said:
This is NOT a mathematics problem! Once you know the definitions of all those terms, and the basic formulas, which are really Economics, the only math involved is arithmetic.

Don't foist that onto economists, who do use real math (though not as much as mathematicians, of course). This is a problem of finance or accountancy, which use no more than basic arithmetic.
 
  • #5
Sorry, I didn't mean to offend economist!

On the other hand, my brother is an accountant and makes four times as much as I do.
 

What is a Reserve Bank Debenture?

A Reserve Bank Debenture is a type of financial instrument issued by a central bank, such as the Federal Reserve in the United States, to borrow money from the public. It is essentially a loan to the central bank, and is backed by the government's promise to repay the amount borrowed plus interest.

How do Reserve Bank Debentures work?

Reserve Bank Debentures are sold to investors through auctions or direct sales. The central bank sets a specific interest rate for the debenture, and investors can purchase them at face value. The central bank then uses the funds raised from the debentures to finance its operations or to regulate the money supply.

What is the difference between a Reserve Bank Debenture and a bond?

The main difference between a Reserve Bank Debenture and a bond is the issuer. Debentures are issued by central banks, while bonds are typically issued by governments or corporations. Additionally, debentures are usually shorter-term investments and have lower interest rates compared to bonds.

Are Reserve Bank Debentures a safe investment?

Reserve Bank Debentures are generally considered safe investments because they are backed by the government's promise to repay the loan. However, as with any investment, there is always a risk of default. It is important to carefully research the creditworthiness of the central bank before investing in their debentures.

What is the role of Reserve Bank Debentures in the economy?

Reserve Bank Debentures play a crucial role in the economy by providing a source of funding for central banks to manage monetary policy and regulate the money supply. They also help to stabilize interest rates and can be used as a tool to control inflation and stimulate economic growth.

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