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

    Bonds with warrants, Bonds with Warrants: Warrants are usually attached...

    Bonds with Warrants: Warrants are usually attached with the bonds or preference shares to attract the investor. The objective is to induce the potential investors to subscribe

    Regulatory requirements for debentures, The following guideline...

    The following guidelines are applicable for the issue of Fully Convertible Debentures (FCDs), Partly Convertible Debentures (PCDs) and Non-conve

    APR and EAR, Assume a bank charges a 15.5% APR (annual percentage rate) on ...

    Assume a bank charges a 15.5% APR (annual percentage rate) on credit card holder compounds quarterly. What EAR (effective annual rate) is the bank is charging? What if they change

    Explain about loans - forms of bank finance, Q. Explain about Loans - Forms...

    Q. Explain about Loans - Forms of Bank Finance? When a bank makes an advance in lump-sum against some security it is called a loan. In Case of a loan, a specified amount is san

    Calculate the price of a put option contract, The price of a non-dividend p...

    The price of a non-dividend paying share, St, follows a geometric Brownian motion process. The current price of the share is £10 and volatility of the share price process is 12% pe

    Employee benefit plan, Employee Benefit Plan - Compensation arrangement, u...

    Employee Benefit Plan - Compensation arrangement, usually in writing, used by employers in addition to wages or salary. Some plans like group term life insurance, medical insuranc

    Operating cycle, operating cycle of a vegetable growing business

    operating cycle of a vegetable growing business

    Financial asseta and time value of money, assume that risk free rate is 8% ...

    assume that risk free rate is 8% and expected rate of return in market is 12%. what is the required rate of return on stock with a beta of 0.8%

    What are ratios of chromex plc, Ratios A great number of ratios might b...

    Ratios A great number of ratios might be appropriate for this purpose depending on the specific kind of financial performance which is being compared. Amongst those appropriate

    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