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

    Show the disadvantages of adjusted discount rate, Q. Show the Disadvantages...

    Q. Show the Disadvantages of adjusted discount rate? (1) The risk premium rates resolute under this method are arbitrary. Therefore this method mayn't give objective results.

    Provisions for paying off bonds, The issuer of the bond has to repay ...

    The issuer of the bond has to repay the bondholders the principal by the stated maturity date. This can be repaid by the issuer in one lumpsum payment at the matu

    Leverage, evaluate the importance of leverage in a small scale companyestio...

    evaluate the importance of leverage in a small scale companyestion..

    Explain the divestment of company re-organisations, Divestment of company r...

    Divestment of company re-organisations Adisinvestment or divestment is selling part of the business or subsidiary to another third party. Reasons and features for divestme

    Evaluation of bids, E v aluation of  bids and determination of the lowes...

    E v aluation of  bids and determination of the lowest  evaluated responsive and qualified bidder You learnt how to receive and open bids in the previous sub section. Here you

    Discuss the objectives of financial statements, Question: The Statement...

    Question: The Statement of Principles for Financial Reporting sets out the principles that should underlie the preparation and presentation of general-purpose financial stateme

    Hedging, how does "x" company hegde itself? the company name will be shared...

    how does "x" company hegde itself? the company name will be shared later.

    Define capital rationing, What is capital rationing?  Should a firm practic...

    What is capital rationing?  Should a firm practice capital rationing?  Why? The term Capital rationing is the practice of setting dollar limits on what will be invested in new ca

    Baumol model, A campany estimate a cash requirment of 900000 the opportunit...

    A campany estimate a cash requirment of 900000 the opportunity interst eate is 9% per anual the transaction cost for borrowing or withdrawing fund is 264.5

    Financial analysis task force, Task I am sure you are aware that the c...

    Task I am sure you are aware that the corporate annual meeting is coming up soon. As part of the Treasurer's presentation, I have been asked to propose a Special Capital Requi

    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