Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
A treasury strip can be sold in two parts based on its components. When the investor is empowered with a right to receive the coupon payments on sale of its treasury securities, such component is called a treasury coupon strip; and when the investor is empowered with a right to receive the principal component of the security on its maturity date, such component is called a treasury principal strip. In simple words, the treasury coupon strips are those created out of coupon payments and the treasury principal strips are those created out of the principal amount.
Treasury coupon stripping is the act of detaching the interest payment coupons from the treasury securities and treating the coupons and the treasury securities as two separate securities. Each coupon entitles its owner to receive an amount as prescribed on a specified date. Similarly, the treasury security entitles its owner to call for repayment of its principal amount on its maturity date. These stripped securities offer investors abundant supply, no default risk, and a less risk of being 'called' or 'paid off', before the date of its maturity.
On stripping, the stripped treasury securities and their coupons are known as 'Zero Coupons' or 'Zeros.' Like zero coupon bonds, treasury strips also do not make any interest payments till maturity. The stripped treasury securities and the coupons are sold at a deep discount from their face values. The difference between the purchase price and the maturity vale of the stripped treasury securities is the yield on such securities. The yield on these stripped treasury securities is called as 'treasury spot rate'.
Zero-coupon securities have no reinvestment risk. This facilitates treasury strips of different maturities to provide a superior relationship between yield and maturity than that of securities on the on-the-run treasury yield curve. The absence of reinvestment risk in these stripped securities eliminates the bias arising from the variations in reinvestment risk of the compared securities. Further, the duration of these securities is more or less equal to its maturity. This provides a facility to compare bond issues against treasury strips on the basis of their duration.
Explain about the investment decision- financial management The investment decision relates to selection of assets in which funds would be invested by a firm. Assets which can
What is the role of investment banking in investment intermediaries? Investment banks: These banks assist corporations or governments into the issue of new debt or equity
Problem: (a) Critically analyse interest rate swap and currency swap. (b) Explain why a bank may face credit risk when it enters into offsetting swap contracts. (c) Two
What is the role of securities firms in investment intermediaries? Securities firms assist within the trading of existing securities into the secondary markets. The two major c
Explain cross-hedging and discuss the factors determining its effectiveness. Answer: Cross-hedging includes hedging a position in one asset by taking a position in another asse
How exchange of principal and interest in one currency? Expalin
Why does the riskiness of portfolios have to be looked at differently than the riskiness of individual assets? The riskiness of portfolios should be looked at differently as comp
Outsourcing Outsourcing is referring to purchase of parts from outside suppliers. Outsourcing is the external acquisition of services or components used in the production of go
a) Distinguish among standard costing and budgetary control. (b)"Calculation of variances in standard costing is not an end in itself, but a means to an end" Brief discussion
Question: Explain: (a) the advantages and disadvantages, to a company, of debt finance over equity finance; (b) the reasons why a company may choose to issue preference s
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!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd