Fixed Income & T-Bills

A bond specifies cash flows, payment dates and an issuer obligation. Some instruments pay coupons; a zero-coupon bill pays its face value at maturity. Yield to maturity is the discount rate equating price with promised cash flows under the calculation’s assumptions. It is not a guaranteed realised return: default, early sale, reinvestment, taxes and costs can change the outcome. Higher required yields usually mean lower prices for unchanged cash flows. Check calendar convention, maturity and price basis before comparing Iranian Treasury bills.

Worked example (hypothetical)

A zero-coupon instrument costs 800,000 rial and pays 1 million exactly one year later. Its pre-cost annual yield is 25%. At the same payment but a price of 900,000, the yield is about 11.1%.

Check your understanding

Can the annual yield be applied directly to a three-month holding? No. Convert using the actual time and compounding convention, and include the sale price.

Sources, reviewed 5 October 2026

• Bonds
• Understanding Bond Yield and Return