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Question

What is the Nominal Amount?

Answer

The nominal amount can be explained in the following example:

You acquire a holding of £1,000 nominal of 6.5% Treasury stock 2006.

£1,000 nominal is the amount of the Gilt.  It is not necessarily how much it is worth now or how much it cost to buy.  But when the stock finally matures in 2006, £1,000 is the capital repayment that the holder will receive.

The actual acquisition cost of the Gilt is determined by the market value at the time of purchase. ie the price may be quoted as £111.75 to £112.50 per £100 nominal of stock.

Therefore if you were looking to buy £1,000 nominal the actual cost to purchase would be £1,125 (before accrued interest or dealing charges).  When you place a deal instruction, it is important to confirm whether you want to invest £1,000 cash OR buy £1,000 nominal of the stock.

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