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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Debt Instruments and Government Securities

Mr. Iyer holds 7.26% Government of India bonds in his demat account. Which of the following correctly describes how coupon interest on such a G-Sec is paid?

Dated government securities pay a fixed coupon half-yearly, calculated on the face value rather than the market value. The market price changes only the yield to the buyer. Interest paid only at maturity would describe a zero-coupon instrument.

  1. ACoupon is paid annually on the face value
  2. BCoupon is paid half-yearly on the face valueCorrect
  3. CCoupon is paid half-yearly on the market value
  4. DCoupon is paid only at maturity along with principal

Explanation

Dated G-Secs in India normally pay a fixed coupon semi-annually, calculated on the face value of the holding. The market price does not affect the coupon amount. Paying only at maturity describes a zero-coupon instrument, not a normal dated G-Sec.

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