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

    Callability, It is a feature that allows the issuer to redeem its bon...

    It is a feature that allows the issuer to redeem its bonds before maturity. Almost all convertible bonds come with this feature. Due to this feature, bonds carry

    Financial accounting, Briefly explain the accounting concepts which guide t...

    Briefly explain the accounting concepts which guide the accountant at the recording stage.

    Cash vs. accrual accounting, Cash vs. Accrual Accounting: While it is b...

    Cash vs. Accrual Accounting: While it is beyond the scope of this module to assess accounting systems against all types of accounting styles, it is important that managers unde

    Investing surplus cash, Investing Surplus Cash : Cash not required for temp...

    Investing Surplus Cash : Cash not required for temporary periods of short durations can be invested in near-cash assets, i.e. marketable securities which are readily convertible in

    Explain the operating profit margin - performance ratios, Operating profit ...

    Operating profit margin Operating profit margin    =   (PBIT / Turnover) x 100% This is the ratio of operating profit to turnover or sales. A high operating profit margin is

    What are the difficulties of capital budgeting, Q. What are the Difficultie...

    Q. What are the Difficulties of Capital Budgeting? 1. Measurement Problems: - Identifying as well as measuring the costs and benefits of a capital expenditure proposals tend to

    Example on walters dividend model, Q. Example on Walters dividend model? ...

    Q. Example on Walters dividend model? Example: - The following information is obtainable in respect of a firm: Capitalisation Rate (Ke)                     = 10% Earning

    Active management in practice, Constant Duration To ...

    Constant Duration To improve a buy and hold strategy a constant average duration is imposed for the managed portfolio during the full interest rate cy

    Limitation of profit maximisation -quality of benefits, Limitation of pro...

    Limitation of profit maximisation -Quality of Benefits Probably the most vital technical limitation of profit maximisation as an operational objective, is that it ignores qua

    Sole proprietorship, Sole Proprietorship This business form is the lega...

    Sole Proprietorship This business form is the legal default form for any person who makes no effort to organize the business otherwise but does business in the United States. T

    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