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. Application of concept of TVM Sometime the financial manager has to deal with the varying situation of the decision making where the concept of TVM needs to be applied in th
Sensitivity analysis A sensitivity analysis studies the impact of specified variations in key factors on the initially-calculated NPV. The initial point for a sensitivity analy
Interest Rate Derivatives: India's first trading on interest rate derivatives began in the National Stock Exchange of India (NSE) in June 2003 with futures on 91-day treasury
Q. Objectives of Cash Management? (i) To sustain Optimum Cash Balance: - The major objective of cash management is to determine the optimum cash balance required in the busines
MARGINAL ANALYSIS It is difficult to develop the conditional profit table when there are a large number of scenarios and possible actions. The marginal analysis approach sides
Q. What is Cost Recovery Method? Cost Recovery Method - METHOD OF REVENUE RECOGNITION that identifies profits after costs are entirely recovered. Normally used only when the to
Can a company have a default rate on its accounts receivable that is too low? Explain. A company might have a default rate on AR that would be considered too low if by liberal
Determine about the risk management systems Management must report to board their review and implementation of internal controls and risk management systems. The board must rev
Differences between Hedge Funds and Mutual Funds Hedge Funds are extremely flexible in their investment options because they use financial instruments generally beyond the reach
There are two major factors to be considered while analyzing sovereign bonds. They are: economic risk and political risk. Economic risk is all about the ability a
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