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.
Market risk as that portion of total variability of return caused by the alternating Forces of bull and bear markets. When the security index moves upward haltingly for a signifi
Explain the conditions under which the forward exchange rate will be an unbiased predictor of the future spot exchange rate. Answer: the conditions when forward exchange rate
You've just won a huge $100 million lottery. You've decided to invest your winnings in the following way: $30 million in real estate, $30 million in corporate bonds and $40 mil
Active Portfolio Strategy: An active portfolio strategy is tracked by most aggressive investors and investment professionals who strive to make superior returns, after adjustm
Discuss the benefits and drawbacks of maintaining multiple manufacturing sites like a hedge against exchange rate exposure. Answer: To set up multiple manufacturing sites can
Explain about the Financial risk financial risk are presumed to be constant, changing cost of each type of capital, j, over time must be affected only by changes in the supply
asdasdasd
Q. Financial Management in Marketing Department? The marketing department of a firm is concerned with the ultimate activity of the firm Le. the selling of goods and services to
Put option is the right of the investor which he may exercise on the date at the put price given in the indenture. Normally, put price is in par value. When yield rises
Reference Index Every FRN chooses its own reference index upon which the calculation of each successive new coupon is based. The most commonly used reference index is LIBOR. It
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