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

    Option-adjusted spread (oas) - total return, The horizon price ...

    The horizon price can be determined by incorporating Option-Adjusted Spread (OAS) into a total return analysis. But this requires a valuation mo

    What can financial institution do for deficit economic unit, What can a fin...

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

    Basic objectives of cash management, Q. Basic objectives of cash management...

    Q. Basic objectives of cash management? The basic objectives of cash management are two-fold: 1) To meet the cash disbursement needs (payment schedule); and 2) To minimize f

    Stabilization policies in the aa-dd model, Stabilization Policies in the AA...

    Stabilization Policies in the AA-DD Model. Suppose the economy of Zion has reached the long run equilibrium (i.e. full employment). Now assume that a best-seller, written by Ne

    Explain the fixed and floating rates, Question 1 Globalization is a pro...

    Question 1 Globalization is a process of international integration that arises due to increasing human connectivity as well as the interchange of products, ideas and other aspe

    Evaluate cost of irredeemable debt subsequent to tax, Q. Evaluate Cost of I...

    Q. Evaluate Cost of Irredeemable Debt subsequent to tax? Cost of Irredeemable Debt subsequent to tax: - When a company utilizes debt as a source of finance then it saves a cons

    Cost of capital, the nu-nu brothers inc. (NNBI) has the following capital s...

    the nu-nu brothers inc. (NNBI) has the following capital structure,

    Interest rates over the business cycle, Interest rates are the key de...

    Interest rates are the key determinants of business cycles in emerging market countries. In the past, several economies had experienced frequent and great changes

    How are financial trades made on an organized exchange, How are financial t...

    How are financial trades made on an organized exchange? Every exchange-listed security is traded at a precise location on the trading floor called the post. The trading is mana

    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