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

    Expected value application in finance - safety stock level, Safety Stock Le...

    Safety Stock Level The simple Economic Order Quantity (EOQ) model used in inventory management assumes that the reorder point  will be at a level equal to (Lead time in number

    Who owns a credit union, Who owns a credit union? Explain. The term Cre...

    Who owns a credit union? Explain. The term Credit unions are owned by their members. While credit union members put money in their credit union, they are not exactly "depositin

    Financial Data and Projections.., I am writing a Marketing Plan for "Advanc...

    I am writing a Marketing Plan for "Advanced Reimbursement Solutions, LLC" and need the following information regarding it: Financial Data and Projections: Past sales revenues, Brea

    Explain the role of commission authorities, Explain the Role of commission ...

    Explain the Role of commission authorities Competition Directorate is one of the independent public bodies which help ensure healthy competition between companies which then be

    Capital market, Capital market: The term capital market is used to deno...

    Capital market: The term capital market is used to denote all the activities of the primary and secondary markets. It can also refer to the market for equity and debt instrumen

    Treasury inflation-protected securities or tips, Treasury Inflation-P...

    Treasury Inflation-Protected Securities (TIPS) are the inflation-indexed bonds, the US Treasury offers. The first offer was made in the year 1997. As the name sug

    Financial control, Internal capital rationing is used by firms for exercisi...

    Internal capital rationing is used by firms for exercising financial control. How does a firm achieve this?

    Prepare a revised aging schedule of account, Debit Credit Accounts recei...

    Debit Credit Accounts receivable $300,000 Allowance for doubtful accounts $35,000 Sales for 2010 were $5,500,000. All sales were sales on account. At the end of each month

    List the main features of ordinary shares, Question 1 Describe the types o...

    Question 1 Describe the types of investment decisions Question 2 List the main features of ordinary shares Question 3 List the assumptions of Walter's dividend model. Ex

    Explain the nature of a concessionary loan, What is the nature of a concess...

    What is the nature of a concessionary loan and how is it handled in the APV model? A concessionary loan is a loan that is provided by a governmental body at below the normal ma

    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