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

    Working capital, which are the components of working capital management?

    which are the components of working capital management?

    Break even period, Break Even Period: It is also important to compare t...

    Break Even Period: It is also important to compare the returns from the equity stock and the bond to determine the profitability of both investments. Assume that the dividend p

    Balance sheet equation concept, Balance Sheet Equation Concept The His...

    Balance Sheet Equation Concept The Historical Cost Concept needs support of two other concepts for practical reasons, viz. (i) The Money Measurement Concept (already discus

    Define the price and earning ratio valuation method, Define the P/E valuati...

    Define the P/E valuation method. Under what circumstances should a stock be valued using this method? The P/E ratio points out how much investor are willing to pay for each dol

    What is an annuity?, What is an annuity? An annuity is a sequence of e...

    What is an annuity? An annuity is a sequence of equal cash flows, spaced consistently over time.

    Profit center, Profit Center A separate unit or department within an or...

    Profit Center A separate unit or department within an organization that is responsible for its own revenues, costs, and there profit. Profit center managers are commonly free t

    How are financial trades made in an over-the-counter market, How are financ...

    How are financial trades made in an over-the-counter market? Discuss the role of a dealer in the OTC market. In difference to the organized exchanges, which have physical locat

    Income statement & balance sheet, in 2002, jackson incorporated had gross s...

    in 2002, jackson incorporated had gross sales of $4269200. for 2002, management estimated that returns and allowances would be 5 percent of gross sales. what did jackson report as

    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