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

    Steps, how control the steps

    how control the steps

    Discuss about the materiality, Discuss about the Materiality An item ca...

    Discuss about the Materiality An item can be considered material if its omission would reasonably influence the decisions of an addressee of report, a misstatement is material

    Sensex, What is Financial index & commodity index? Method of index uses in ...

    What is Financial index & commodity index? Method of index uses in calculation? Weighted average method? How to calculate index?

    Yield curve risk, The graphical representation of the relationship between ...

    The graphical representation of the relationship between yield and maturity is known as yield curve. Yield curve risk is the risk of experiencing an adverse

    Budget setting styles, Advantages and disadvantage of pacipatory style of b...

    Advantages and disadvantage of pacipatory style of budgeting

    How industrial company inflate the value of its inventory, How can an indus...

    How can an industrial company inflate the value of its inventory so as to decrease net income and the taxes is has to pay that year? If a company increases the value of its inv

    Mr.Manikanta, can u tell me the various approaches followed by FMCG Compani...

    can u tell me the various approaches followed by FMCG Companies in test markets

    Basic assumptions of cost of capital, Basic Assumptions of Cost of Capital ...

    Basic Assumptions of Cost of Capital The Cost of Capital is a dynamic concept affected by a multiplicity of economic and firm factors and assumes the following assumptions rela

    Define how forecast the exchange rate, As of November 1, 1999, the exchange...

    As of November 1, 1999, the exchange rate in between the Brazilian real and U.S. dollar is R$1.95/$. The agreement forecast for the U.S. and Brazil inflation rates for the next 1-y

    How to calculate cost of capital?, To calculate the Cost of Capital, we wil...

    To calculate the Cost of Capital, we will use the Weighted Average Cost of Capital (WACC) formula             WACC = (E/V) X R E + (D/V) X R D X (1 - T C ) where

    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