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

    Define discounting the equity cash flow, Which of these two methods is bett...

    Which of these two methods is better: discounting the Equity Cash Flow or discounting the Free Cash Flow? The results we get by discounting the Equity Cash Flow and the Free Ca

    What do you know about sinking funds, Q. What do you know about sinking fun...

    Q. What do you know about sinking funds? sinking funds : quite often, one may be interested to accumulate a target amount over a given period inclusive of interest for the peri

    Credit analysis- account receivable management, Credit analysis Assessm...

    Credit analysis Assessment of creditworthiness depends on the examination of information relating to the new customer. This information is frequently generated by a third party

    How to finance the exit of the financiers, How to finance the exit of the f...

    How to finance the exit of the financiers The company would have to decide how to finance the exit of the financiers. Considerations comprise: (i)  Selling shares to the pub

    Operating cycle, make an cash conversion cycle of cabbages

    make an cash conversion cycle of cabbages

    Passive management, In the efficient markets, whether it is sec...

    In the efficient markets, whether it is security, equity or fixed-income markets it is believed that the investors use some type of passive strategy in

    Players in primary market, PLAYERS IN THE PRIMARY MARKET Some important...

    PLAYERS IN THE PRIMARY MARKET Some important players in the primary market are: Merchant Bankers When a company approaches the public for funds, merchant bankers manage

    Explain significance of international financial management, Why is it impor...

    Why is it important to study international financial management? Answer:  We are now living in a world in which all the main economic functions, that are production, consumption,

    Decision making, Write a report to the Board of Directors of Solvent Ltd to...

    Write a report to the Board of Directors of Solvent Ltd to analyse the performance of companies X and Y and to give recommendation as which of those two investment opportunities is

    Features of capital budgeting decisions, Features of Capital Budgeting Deci...

    Features of Capital Budgeting Decisions 1.       Existence of potentially large anticipated profits. 2.       Involves a comparatively high degree of risk 3.       Exist

    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