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Along the dimension of security, bonds can be classified into unsecured (straight) bonds and secured (mortgage) bonds. Unsecured bonds have no charge on any specific assets of the company while secured bonds carry a fixed or floating charge on the assets of the company.
The distinction between secured and unsecured bonds becomes relevant in case the issuer defaults in the payment of interest or principal. The secured bondholders are entitled to take possession of the security given to them and realize their dues by selling these assets (typically land, building, machinery, etc.). This right is valuable to the bondholders provided the security is worthy, easily saleable and has not been simultaneously given as security to other creditors as well. All these factors have to be examined while evaluating a secured bond. Unsecured bonds are not backed by any such security, but the bondholders need not worry about this if they believe that the company is financially very sound and is unlikely to default.
Let us construct a binomial interest rate tree for a 5.5% option free bond taking Table 3 as the binomial interest rate tree. Table 1 shows the various values in
Project Evaluation The expected value calculations are crucial to project investment decisions. The following example explains the use of probabilities in project evaluation.
This question tested the core area of specifically gradually consolidation and acquisitions (control to control). The principle of calculation of goodwill at the date where control
Bond Price is the purchase value of a bond. It can be priced either at a premium, discount or at par. It is important for the prospective buyer to know how to det
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Question 1 Describe the importance of commodity finance and sensitive commodities Question 2 Securities purchased by a bank for investment purposes are referred to as seconda
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