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

    The indirect method to add back depreciation, Calculate the Operating Cashf...

    Calculate the Operating Cashflows from 2007 - 2011 using the indirect method to add back depreciation. Suppose that depreciation will grow at the similar rate as sales.

    Cost principle - accounting principle, Cost Principle - Accounting Principl...

    Cost Principle - Accounting Principle According to this principle all the non-monetary assets of the business are display in the books of accounts at the historical cost that

    What are free cash flows, What are "free cash flows?" Free cash flows s...

    What are "free cash flows?" Free cash flows signify the total cash flows from business operations that are available to be distributed to the suppliers of a firm's capital each

    Explain how a country can run an overall balance of payments, Explain how a...

    Explain how a country can run an overall balance of payments deficit or surplus. Answer:  A country can run a whole BOP (balance of payments) deficit or surplus by engaging in th

    Question, What can a financial institution often do for a deficit economic ...

    What can a financial institution often do for a deficit economic unit (DEU)that it would have difficulty doing for itself if the DEU were to deal directly with an SEU?

    PROFIT MAXIMIZATION, what are the arguments in favour of profit maximizat...

    what are the arguments in favour of profit maximization?

    Show market risk in systematic risks, Market risk as that portion of total ...

    Market risk as that portion of total variability of return caused by the alternating Forces of bull and bear markets. When the security index moves upward haltingly for a signifi

    Capital budgeting model, Develop a scenario for the future growth of the fi...

    Develop a scenario for the future growth of the firm e.g. through using a SWOT analysis to identify an appropriate outcome (this will be covered in lectures) • If it is to grow

    Legal framework-asic, Legal Framework ASIC, in order to equip itself wi...

    Legal Framework ASIC, in order to equip itself with its wide-ranging functions, is empowered with additional resources and new legislative powers. Towards this, the Australian

    Definition of financial management, DEFINITION OF FINANCIAL MANAGEMENT ...

    DEFINITION OF FINANCIAL MANAGEMENT Financial Management is a stream concerned with the generation and allotment of scarce resources (generally funds) to the most proficient use

    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