InvestorQ : How are the Face Value, Trade Value and the settlement value of the bond different from one another? Can you explain the importance?

# How are the Face Value, Trade Value and the settlement value of the bond different from one another? Can you explain the importance?

3 years ago
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The Cumulative face Value of the securities in a transaction is the face Value of the Transaction and is normally the identifiable feature of each transaction.

Say, a transaction of Rs.5,00,000 worth of G-Secs will comprise a trade of 5000 G-Secs of Rs.100 each.

The Trade value is the cumulative price of the traded G-Secs (i.e. no. of securities multiplied by the price)

Say, the G-Secs referred to above may be traded at Rs.102 each so that the Trade Value is Rs.5,10,000 (102 x 5000).

The Settlement value will be the trade value plus the Accrued Interest.

The Accrued Interest per unit of the Bond is calculated as = Coupon of Bond x Face Value of the G-Sec.

(100) x (No. of Days from Interest Payment Date to Settlement Date)/360

In computing the no. of days between the Interest Payment Date and the Settlement Date of the trade, only one of the two days is to be included.

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