Bonds are a type of debt security that represents an agreement between an investor and a borrower.
The borrower, typically a government or corporation, promises to pay the investor a fixed interest rate over a specified period of time.
In return, the investor lends the borrower a certain amount of money.
The 8.70% Bank of Baroda Perpetual Call is a type of bond issued by the Bank of Baroda, a leading public sector bank in India.
This bond is unique in that it has no maturity date, meaning that the bank is not obligated to repay the principal amount to the investor.
However, the bank does have the option to call the bond on or after the fifth anniversary of the issue date.
What is the interest rate for the 8.70% Bank of Baroda Perpetual Call?
The interest rate for the 8.70% Bank of Baroda Perpetual Call is 8.70% per annum, which is paid annually.
This means that for every Rs. 1,000 invested, the investor will receive Rs. 87 in interest each year.
The face value of the 8.70% Bank of Baroda Perpetual Call is Rs. 10,000. This means that the investor will receive Rs. 10,000 if the bond is not called by the bank.
Risks of investing in the 8.70% Bank of Baroda Perpetual Call?
The main risk of investing in the 8.70% Bank of Baroda Perpetual Call is credit risk.
Credit risk is the risk that the bank will not be able to repay the principal amount of the bond or make the interest payments.
The credit rating of the Bank of Baroda is AA+, which is considered to be a relatively low credit risk.
However, it is important to note that even bonds with high credit ratings can carry some credit risk.
Who should invest in the 8.70% Bank of Baroda Perpetual Call?
The 8.70% Bank of Baroda Perpetual Call is a suitable investment for investors who are looking for a fixed income investment with a relatively low credit risk.
The bond is also suitable for investors who have a long-term investment horizon and who are comfortable with the risk of not receiving the principal amount of the bond if it is called by the bank.