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

    Share-based payments and retirement benefits, Applicant should have been we...

    Applicant should have been well versed in the calculation of actuarial losses and gains on pensions. It would have been significant to ensure each item affecting liabilities and as

    Describe the main elements of working capital management, Question: (a)...

    Question: (a) Describe the main elements of Working capital management? (b) Belle Rive Ltd Belle Rive Ltd has an annual turnover of Rs 60 million of which 80% is on cr

    What interest rate is required to yield a balance, You invest $1,000 at an ...

    You invest $1,000 at an annual interest rate of 5% compounded continuously. How much is your balance after 8.5 years?  How long will it take you to accrue a balance of $4,000? What

    Find the impact of price and trading volume, Purpose of research: The a...

    Purpose of research: The aims of this research are to examine the effectiveness of speculation on efficiency of Petrochemical sector in Saudi Arabia financial market"TADAWUL".

    Define intermediation, Define intermediation The financial system makes...

    Define intermediation The financial system makes it probable for surplus and deficit economic units to come together, exchanging funds for securities, to their mutual advantage

    What are the rationales of interest swaps, Question: i) What are the ...

    Question: i) What are the rationales of interest swaps? ii) You are the corporate treasurer of LSE International Inc. Your firm, rated as AAA, is able to raise capital in

    Reasons for time preference of money, Q. Reasons for Time Preference of Mon...

    Q. Reasons for Time Preference of Money? 1) Future Uncertainties: One of the reasons for preference for current money is that there is a certainty about it whereas the future

    The visitors perceive to justify the renovation, Lincoln Park Zoo in Chicag...

    Lincoln Park Zoo in Chicago is considering a renovation that will improve some physical facilities at a cost of $1,800,000. Addition of new species will cost another $310,000. Addi

    Benefit and drawback of maintaining many manufacturing sites, Discuss the b...

    Discuss the benefits and drawbacks of maintaining multiple manufacturing sites like a hedge against exchange rate exposure. Answer:  To set up multiple manufacturing sites can

    Average collection period ratio, What is Average Collection Period Ratio? P...

    What is Average Collection Period Ratio? Please provide me report on Average Collection Period Ratio.

    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