Debt securities, Financial Management

Assignment Help:
  • Fixed income security is a financial obligation of an entity, which promises to pay a pre-specified amount of money at per-specified date.

  • Debt securities (such as bonds, mortgage-backed securities, asset-backed securities and bank loans) at first sight appear less glamorous and exciting.

  • The face value or nominal value of the debt security can be thought of as the principal amount on which interest is paid by the issuer.

  • Bonds typically pay interest periodically at a pre-specified rate of interest.

  • Accrued income involves the recognition of revenue earned before it is actually received.

  • Embedded Option is part of the structure of a bond that provides right to both the parties (issuer and bondholder) to take action against each other party, as opposed to a bare option, which trades separately from any underlying security.

  • Cap is the restriction on the coupon from increasing; it is an unattractive feature for the investors.

  • There could be a minimum coupon rate specified for a floater. This rate is called a floor.

  • A floater can have both a cap and a floor. This feature is referred to as collar.

  • T-Bills are issued to enable the government to tide over short-term liquidity requirements with maturities varying from a fortnight to a year.

  • Bond indices exist for the reasons of managing portfolios and measuring performance, similar to the NSE, BSE, S&P 500 or Russell Indexes for shares.

  • Conversion ratio is the number which tells how many common shares (or preference stocks) will be received by the bondholder at the time of conversion. It is usually constant over the life of the security and protect against losses caused by the stock splits or large stock dividend.

  • Conversion value is the amount which investors can receive by immediately exchanging their bonds for equity shares and selling these shares at prevailing market price of the common stock.

  • The price at which convertible securities trade in the market is higher that the conversion value and straight value.

  • Call schedule shows the date and corresponding prices at which an issuer can call back bonds.

  • inking fund provisions is a pool of funds set aside to repay the debt. Under this, certain amount of money is kept aside every year from the profits. It is helpful to repay interest and the principal every year or at the end of the period.


  • Related Discussions:- Debt securities

    Define swap broker, Define Swap Broker A swap broker arranges a swap am...

    Define Swap Broker A swap broker arranges a swap among two counterparties for a fee with no taking a risk position in the swap.

    Explain taxonomy of financial intermediaries, Taxonomy of financial interme...

    Taxonomy of financial intermediaries We start by looking at the USA, the largest economy and financial system in the world. Subsequently we will turn to other countries. In the

    Is there an optimal capital structure, Is there an optimal capital structur...

    Is there an optimal capital structure? What is it and how can it be calculated? There is no optimal capital structure. Capital structure is a variable which depends on the incl

    Ratio analysis and company valuation, As an investment advisor, you have be...

    As an investment advisor, you have been approached by a group of professional investors (probably who already have a well-diversified portfolio). They are considering investing in

    Call schedule, It shows the date and corresponding prices at which th...

    It shows the date and corresponding prices at which the issuer can call back bonds. The issuer pays higher premium over the par value of the bond if the bond is c

    Accounting standards, Accounting Standards The paradigm shift in the e...

    Accounting Standards The paradigm shift in the economic environment during last few years has led to increasing attention being devoted to accounting standards as a means towa

    Market-based versus bank-based financial systems, What do you meant by mark...

    What do you meant by market-based and bank-based financial systems? Market-based versus bank-based financial systems implications. The presence of market-based and bank-base

    How can we estimate that firm is going to benefit, Ho can we estimate that ...

    Ho can we estimate that firm is going to benefit from projec To calculate how firm is going to benefit from project we need to calculate whether firm is earning the required ra

    Write Your Message!

    Captcha
    Free Assignment Quote

    Assured A++ Grade

    Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

    All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd