Gilt Edged Securities
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Hiya,<BR><BR>Have read about this but having difficulty understanding how these work - benefits of investing in these. Would appreciate an explanation with an example.<BR><BR>Thanks
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Gilt Edged Securities
Gilts are securities issued by the Treasury. They pay a fixed rate of interest for a, generally, fixed term. Because the interest paid is fixed and general investment rates are variable, the capital value of the Gilt varies. For example, if a gilt was paying 6% on a paper valure of £100, the interest received would be £6 regardless of how much you actually pay for it. If the prevailing interest variable rate was 4% (Building Soc. etc) then in order to get £6 interest with a rate of 4% you would need to invest 6/0.04 or £150. This would be the value of the Gilt. If the redemption rate is nearer than about 7 years the calculation is slightly more involved and, I would have thought, outside the scope of AAT.0 -
Gilt Edged Securities
wow! I did not put that explanation in my mock Devolved Assessment. <BR><BR>I have taken it on board though for the Actual Devolved in 2 weeks <BR><BR>Thanks <BR><BR>Lisa0