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

    Short-term self-liquidating loans to business by bank. why?, Banks like to ...

    Banks like to make short-term, self-liquidating loans to businesses.  Why? Banks like can see where the funds are likely to come from such that the borrower is able to use to m

    Define the modigliani and miller theory of dividends, What is the Modiglian...

    What is the Modigliani and Miller theory of dividends?  Explain. The Modigliani-Miller theory of dividends states that dividend theory is not relevant.  They state that it is the

    Management of Financial Institution, 1. Why do the banks borrow funds, besi...

    1. Why do the banks borrow funds, besides accepting deposits? Discuss in detail the various sources from where banks can borrow funds within India.

    What is alternative minimum tax, Q. What is Alternative Minimum Tax? Al...

    Q. What is Alternative Minimum Tax? Alternative Minimum Tax (AMT) - Tax imposed to back up the regular income tax imposed onCORPORATION and individuals to guarantee that taxpay

    FINANCIAL RISK MGT, DQ #1: Discuss the challenges of VaR approaches in valu...

    DQ #1: Discuss the challenges of VaR approaches in valuing risk. How does portfolio risk assessment differ from a single asset’s risk assessment? How do managers typically load ba

    Define required cash and surplus cash, 1. What is a venture's present value...

    1. What is a venture's present value? Does the past matter? What is meant by the statement, "If you are not using estimates, you are not doing a valuation?" 2. Define (a) requ

    Macaulay duration and modified duration, We can also express Modified...

    We can also express Modified duration as follows:                                                                                               ...Eq. (3) The

    Working capital cycle for a trade, Working capital cycle for a trade ...

    Working capital cycle for a trade Inventories days (time inventories are held before being sold)   Plus   Trade receivables days (how long

    Determine the purchasing in leaminger plc, b) Each $1 of outlay prior to 3...

    b) Each $1 of outlay prior to 31 December 2003 would mean a loss in NPV on the alternative project of $0·20. There is so an opportunity cost of using funds in 2002. Purchasing

    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