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.
Q. What are the Motives of Holding Cash? Motives of Holding Cash: - In every business assets are kept for the reason that they generate profit. But cash is an asset which doesn
what is financing mix?
(a) A debt of $3600 with interest at 6% compounded semiannually is to be amortized by semiannual payments of $900 each, the rst due in 6 months, together with a nal partial payme
What is the role of a broker in security transactions? How are brokers compensated? Brokers manage orders to sell or buy securities. Brokers are agents who deal on behalf of an
Financial Management: Financial management is, in its most basic interpretation, the management of costs against revenue. Other management initiatives, such as marketing, are d
Question: You have just been appointed the secretary of the ALM Committee (ALCO) of ABN Bank. The ALCO members have some queries relating to the liquidity risk faced by the ban
What are the Weaknesses of the traditional approach The traditional approach to the scope of finance function evolved during 1920s and 1930s and dominated academic during 40's
In convertible bonds, bondholders get a right to convert their bonds for a specific number of shares of the bond issuer. This privilege allows bondholders to take
The Relationship between Futures Price and Cash Price Any commodity that can be bought in the market has a price, which is referred to as cash or spot price for immediate deliv
What are some of the factors that common stockholders consider when deciding how much, if any, cash dividends they desire from the corporation in which they have invested? Gene
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