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

    Budgeting, Budgeting: All business owners should recognise and understa...

    Budgeting: All business owners should recognise and understand the importance of preparing and maintaining a financial budget for their business. Budgets are an essential fi

    What is the tolerable error, What is the Tolerable error In addition t...

    What is the Tolerable error In addition to looking at material differences individually the auditor must list all the differences (material or not) and consider in total wheth

    What is planning, What is Planning Internal auditors must plan the audi...

    What is Planning Internal auditors must plan the audit work so as to perform the audit in an effective manner.There must be sufficient audit programmes in existence which set o

    Weak form level of efficiency-forms of efficiency, Weak form level of effic...

    Weak form level of efficiency This level states that share prices fully reflect information in historic share price movement and patterns (past information/historic information

    Just-in-time inventory management processes, Q. Just-in-time inventory mana...

    Q. Just-in-time inventory management processes? Just-in-time (JIT) inventory management processes seek to eliminate any waste that arises in the manufacturing process as a resu

    Agency policy theorem, How might management try to solve the problems foun...

    How might management try to solve the problems found in agency theorem

    Working capital management, Q. Working capital management? Every busine...

    Q. Working capital management? Every business needs funds for the two purposes for its establishments and to carry out day to day operations. Long terms funds are required to c

    Asset Securitization Structures (Excel help), #questAs an assistant vice pr...

    #questAs an assistant vice president at a regional bank, your boss has tasked you to acquire $100 million of residential mortgages to be securitized in a pass-through MBS. There mu

    Features of government securities, Features of government securities: ...

    Features of government securities: Issuers The government securities are issued by the central government, state governments, and semi-government authorities like municipa

    Liquidity of a company, Eco Tyre Ltd. (ETL) - incorporated in year 2003 and...

    Eco Tyre Ltd. (ETL) - incorporated in year 2003 and entered into automobile tyre manufacturing business by introducing a new tire manufacturing technology. Over the years, ETL has

    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