The document provides an overview of a government bond offering in Bhutan. It describes the key terms of the bond including a face value of Nu. 1,000, a tenure of 10 years, and an interest rate of 6.5% paid semi-annually. It also explains that the bonds were offered through a yield-based uniform price auction. The document defines various bond terms and characteristics, and addresses common questions about defining investment and the objectives and desired features of investing in government bonds.

1. Interactive Exercise 1
Group 1;
Sha Veer Kharka
Rajesh Monger
Lobzang Tshewang
Singye Lhamo
Renu Maya Monger
Pema Yeshi
Rinchen Wangmo
Sangay Lhamo
Pema Deki
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2. Overview of the Government Bond offer
document
 Series No: RGOB 007
 Issue Amount: Nu. 1,250 million
 Tenure: 10 Years
 Face Value: Nu.1,000
 Allotment Method: Yield Based Uniform price auction
 Day Count Convention: 30/360
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3. Definitions for the terms in the Bond certificate
Bond A bond is a fixed-income instrument that represents a loan made by
an investor to a borrower (typically corporate or governmental).
Bonds are debt instruments and represent loans which governments and
corporations commonly use in order to borrow money
Day-count Convention
30/360 - Calculates the daily interest using a 360- day year and then
multiples that by 30 (Standardized month).
A day count convention is a system used in the bond market to determine
the number of days and the amount of accrued interest between two
coupons dates.
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4. Yield-based uniform price auction
 Under the uniform price method, all successful bidders are required to
pay for the allotted government securities at the auction cutoff rate
 A yield-based auction is generally conducted when a new government
security is issued.
Investors bid in yield terms up to two decimal places
Uniform Price auction
 A public sale in which a fixed number of similar things are sold at the
same price.
Each buyer asks for a particular amount and the auction offers a
particular uniform price that is paid to all the investors.
Fiscal Agent (RMA in our case)
It is a financial institution or other third party receiving remittances and/or
making disbursement on behalf of the state.
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5. Characteristics of Bond
1. Face Value: Nu.1000 in the RGoB 007
2. The coupon Rate: As per the auction result, it was fixed at 6.5%
annually
3. Coupon dates: Semiannually (2nd February and 2nd August)
4. The maturity date: 10 years (2 February 2033)
5. The issue Amount: Nu. 1,250 million
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6. Questions and Answers
1. How would you define investment?
Investment is defined as the commitment of current financial
resources in order to achieve higher gains in the future.
Time and future are the two important elements in investments
Investment is a sacrifice of certain present value for the uncertain
future reward.
Broadly speaking, an investment decision is a tradeoff between risk
and return.
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7. 2. What are the objectives of your investment?
i) Saving or preserving capital
ii) Profitable returns
iii) Consistent and steady return of the investment
iv) Minimize Risk
v) Maximize returns
vi) Capital appreciation: Capital appreciation is a rise in an investments
market price. Capital appreciation is the difference between the
purchase price and selling price of an investment.
vii) Regular payment of interest
viii) To help the government to recover its fiscal deficits
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8. 3. If you choose to invest in RGoB bond, what kind of features would
you like to have?
i) Provide a predictable income stream
ii) Low risk and constant return
iii) Predictable return
iv) Safety from the various risks such as credit risks, interest rate risks,
inflation and fraud
v) Liquid: Easy to sell as and when required
vi) Timely maturity
vii) Fixed coupon rates
viii) Tax exemptions
ix) Easy to value
x) The bond investment be used as a collateral for loans
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9. Valuation of the Bond issued at Par Present
Value of Semi-annual payments
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