Secured versus unsecured bonds, Financial Management

Assignment Help:

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.


Related Discussions:- Secured versus unsecured bonds

What is alternative minimum tax, Q. What is Alternative Minimum Tax? Al...

Q. What is Alternative Minimum Tax? Alternative Minimum Tax (AMT) - Tax imposed to back up the regular income tax imposed onCORPORATION and individuals to guarantee that taxpay

Weighted average cost of capital of firm, Weighted average cost of capital ...

Weighted average cost of capital of Firm: Use the following information to answer the questions. Security Beta Expected retur

Treasury bills, T-Bills are issued to enable the government to tide o...

T-Bills are issued to enable the government to tide over short-term liquidity requirements with maturities varying from a fortnight to a year. These instruments a

Explain about the debt policy, Explain about the debt policy Designing...

Explain about the debt policy Designing debt policy the debt policy of a firm is significantly influenced by the cost consideration. In designing financing policy, that is, p

Strong form level of efficiency, Strong form level of Efficiency This l...

Strong form level of Efficiency This level states that price reflects all the available public and private information (past, present and future information). If the hypothesis

Determine about the strategic benchmarking, Determine about the Strategic B...

Determine about the Strategic Benchmarking Comparison in terms of an organisations 'strategic choices' made to the most successful market leader for example review organisat

Financial management, Financial Management: Financial management is, in...

Financial Management: Financial management is, in its most basic interpretation, the management of costs against revenue. Other management initiatives, such as marketing, are d

Working capital based on operating cycle, Q. Working Capital Based on Opera...

Q. Working Capital Based on Operating Cycle? The concept of operating cycle, helps determining The time scale over which the current assets are maintained. The operating cycle

Problems arising due to the existing structure, Problems Arising Due to the...

Problems Arising Due to the Existing Structure The problems that arise as a result of an increase in the population of older generation is universal in nature. Unless there are

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