Identifier: C6T3L4 | Revision: 2026-10-26 | Planned study: 10–15 minutes, excluding extended practice.

Decision and objectives

Decision: A direct maturity promise and a rolling bond fund’s sale value are different cash routes, even with similar holdings. Objectives: Compare direct maturity cash with a fund sale; Calculate common-base-currency net outcomes; Select a route for a fixed-date requirement. Prerequisite: C6T3L3.

All numerical offers, rates, prices, account chains, fees and contract parameters below are hypothetical, unless a primary document is expressly identified. They are not current executable offers or evidence that a Turkey-resident investor can access them. The assumed investor is a Turkey-resident individual outside a business, with no assumed US citizenship or tax residence; actual classification must be checked. Results are before actual tax unless a fictional tax schedule is explicitly supplied. No account, deposit or trade is required.

Mechanics

A direct bond and a bond ETF can hold similar interest-rate exposure without providing the same investor cash promise. A direct noncallable issue has its contractual maturity and issuer default terms. A conventional rolling bond ETF continually replaces holdings to maintain a mandate; its units do not normally mature at the date of one underlying bond. Distributions can vary and market sale is needed to produce cash. A target-maturity fund has its own liquidation policy and residual risks; it must not be assumed from an ordinary ETF label.

Price and return drivers

Compare dirty purchase cost, coupons or distributions, final executable price, costs and FX on the same dates. A bond’s coupon is not a fund’s total return, and a fund’s published return usually already includes ongoing expenses. Direct holdings can require denominations, dealer spreads and concentrated credit; a fund can diversify and allow smaller units while retaining duration and trading-spread risk. A foreign sovereign and a Turkish-issuedEurobond in the same USD currency still have different issuers and legal terms.

Worked case

Synthetic one-year USD 10000 budget. Direct bond purchased at dirty 10000, redeems 10000 and pays 500 coupon, all costs 60: final 10440. Foreign bond ETF starts 10000, distributes 400, ends at executable sale value 9900 after embedded expenses, investor costs 40: final 10260. At initial FX 32 TRY/USD, starting TRY 320000. With final FX 34, direct cash 354960 TRY and ETF 348840 TRY; net gains 34960 and 28840. The direct route has better supplied terminal cash, but that result assumes issuer payment and an exact maturity match. No statutory tax rate or current denomination is implied.

Three-way liability practice, independent synthetic USD case: an investor has USD 10000 now and must receive at least USD 10400 on day 366. All three access routes and credit exposures are stipulated acceptable; actual taxes are excluded. Sovereign S is noncallable, pays face 10000 plus coupon 450 on day 365, and has USD 40 total investor costs: net 10410 available on day 366. Corporate C pays coupon 650 if held one year, but may call at par on day 180. In the required call stress it returns principal 10000 plus coupon 325; reinvestment for the remaining 180/360 at supplied 2% simple annual interest and USD 60 total costs leaves 10325 × 1.01 − 60 = 10368.25. Without a call C would leave 10590, but that state alone is insufficient. Rolling bond ETF F distributes USD 450; its stipulated day-365 stress sale bid is 9850 and total investor costs 30, leaving 10270. A better sale bid of 10050 would leave 10470, but is not guaranteed. Every stated payment/sale settles before the liability. Choose S within these supplied performance and stress assumptions: it clears the liability by USD 10, while the required C/F stress states leave shortfalls 31.75 and 130. This is not a universal sovereign guarantee or a current offer; a credit/default or settlement failure still requires a separate stress.

Adverse case

For final FX 28, 32, 36, direct TRY cash 292320, 334080, 375840; ETF 287280, 328320, 369360. The direct USD gain does not guarantee a TRY gain. In a separate early-sale bond scenario, dirty bid 9500 plus coupon 250 and remaining total costs 60 gives 9690 USD, a 310 loss; holding-to-maturity cash cannot be used for that earlier need. A fund rate shock reducing its sale value to 9000 with 400 distributions and 40 costs gives 9360 USD. For a real portfolio, issuer and currency stresses can occur together.

Practical use

Get the actual bond denomination, dirty quote, call/default terms and payment dates, or the ETF’s mandate, portfolio maturity, distribution policy and executable depth. Verify intermediary/custody and transfer calendars; a foreign market’s sale settlement does not establish the date TRY can be withdrawn.

Before implementation verify the legal entity, jurisdiction, authorized access, actual instrument identifier and full documents. Include bid/ask, commissions, transfer/FX, custody, funding and exit costs; avoid deducting already embedded fund expenses twice. Recheck residency, income year, acquisition dates, withholding, treaty and domestic declaration treatment. Foreign tax concessions or investor protections do not follow automatically from the instrument name or trading currency.

Decision boundaries

Choose a direct maturity only if the payment date, denomination and credit fit; choose a fund when diversified exposure and flexible unit size justify its variable sale value. Decline either route for a rigid TRY liability if the FX stress leaves a shortfall without a separately affordable hedge. A domestic bond orEurobond fund may simplify access while retaining its own duration, expense and redemption constraints.

Practice and references

Exercise: direct route ending USD 5200 after all costs; ETF route USD 5170 after all embedded and investor costs. Each starts at USD 5000 bought at 30 TRY/USD; final conversion is 29 TRY/USD with no further charge. Calculate final TRY cash, net TRY returns and their difference. Solution: direct cash is 150800 TRY and ETF cash 149930 TRY; initial cash is 150000 TRY. Returns are 0.5333% and −0.0467%. The USD 30 difference becomes TRY 870. No extra expense-ratio deduction is warranted from already-net fund cash.

Takeaway: A direct maturity promise and a rolling bond fund’s sale value are different cash routes, even with similar holdings. References: product card, formula; glossary: Rolling bond fund; Direct maturity; Dirty purchase cost. Next: C6T4L1. Topic test.

Sources: GIB: Investment Income Guide (retrieved 2026-10-26; Introduction and foreign income/reporting framework). SEC: Exchange Traded Funds (retrieved 2026-10-26; Structure, price and NAV). US Treasury: Marketable Securities FAQs (retrieved 2026-10-26; Payments, auction and intermediary holding routes). SEC: Corporate Bonds (retrieved 2026-10-26; Seniority, credit quality and default). Revision: 2026-10-26; recheck changeable rules before publication.

Shared reference guide | Class examination