Basic Characteristics of Bonds and their Dynamics on the Croatian Secondary MarketReport as inadecuate

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FIP - journal of finance and law, Vol.4 No.1 March 2016. -

In light of recent announcements of the Ministry of Finance about the

emission of the so-called national bonds, this paper deals with the problems related to

bonds as the most widely accepted financial instrument on the Croatian secondary market.

Although the meaning of the bond as a debt security financial instrument is probably

clear to everyone, trading and utilization of all the advantage this financial instrument

offers is still insufficiently developed. Moreover, since bonds appear to be a possible alternative

to bank deposits, it is necessary to determine the basic concepts of the difference in

the calculation of yield between these two potential investments. Considering these facts,

the contribution of this paper is aimed at taking a closer look and simplifying the overall

understanding of this significant financial instrument. On top of that, the purpose of this

paper is to raise the awareness of the broader public with respect to understanding of the

basic characteristics of bonds, their advantages and disadvantages and ultimately to elaborate

in detail the investment possibilities offered by bonds, as one of the most popular debt

security financial instrument in Croatia. The first chapter describes the general problems

related to bonds, their basic characteristics and current divisions. The paper then elaborates

current dynamics of bonds in the secondary capital market in the Republic of Croatia,

providing a comparative presentation of purchase and sale trade channels in the secondary

market. The final chapter shows a practical example of price and yield calculation until

maturity of the bond issued by the Ministry of Finance of RoC, being traded on Zagreb

Stock Exchange.

Bonds; valuation; Croatian secondary market

Author: Andrijana Sesar - ; Raiffeisenbank Austria d.d Bojan Tomić - ; HEP d



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