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

    Meaning of capital budgeting, Meaning of Capital Budgeting Decisions r...

    Meaning of Capital Budgeting Decisions relating to irreversible commitment of funds to projects whose profits are to be reaped over a time span longer than the current account

    Role of the public expenditure management system, Question : (a) The ro...

    Question : (a) The role of the Public Expenditure Management System (PEMS) is to allocate and use resources responsively, efficiently and effectively'. Briefly explain the abo

    Illustrate the audit plans, Illustrate the audit plans Audit team must ...

    Illustrate the audit plans Audit team must be sufficiently familiar and fully briefed by manager and have knowledge of the business or operation such that to be able to carry o

    Explain dual currency bond, Explain Dual Currency Bond A dual currency ...

    Explain Dual Currency Bond A dual currency bond is a straight fixed-rate bond that is issued in one currency and pays coupon interest in that similar currency.  At maturity, th

    Historical look at the treasury yield curve, The minimum interest rate ...

    The minimum interest rate which investors demand for non-treasury securities is represented by the yield offered on the treasury securities. This is why market particip

    Define that an option is in-, What is meant by the terms that an option is ...

    What is meant by the terms that an option is in-, at-, or out-of-the-money? Answer:  A call or put option with S t > E (E > S t ) is considered to as trading in-the-money.  If

    Ledgers, Ledgers: Ledgers record all the entries into the Cash Books. T...

    Ledgers: Ledgers record all the entries into the Cash Books. They use the concept of 'double entry' bookkeeping where every ledger entry must be accompanied by another ledger e

    Explain the purpose of corporate appraisal, PRC Company, a retailer of baby...

    PRC Company, a retailer of baby clothes and toys, has been in existence for 20 years. Its approach to strategy has tended to be informal and emergent rather than planned. However,

    Illustrating a straddle, Options Traded on Legal and General August 14  200...

    Options Traded on Legal and General August 14  2009 Share   Price         Exercise      Price    Calls       Puts                                 Sep        Dec        Mar

    Monetary approach to the Exchange Rate, a The Monetary Approach to the ER. ...

    a The Monetary Approach to the ER. All else equal, an increase in the interest rate in Canada is associated, in the long run, with higher prices in Canada and an appreciated exchan

    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