Essential characteristics of a bond

Assignment Help Business Management
Reference no: EM131182080

Congratulations. You have been promoted to vice president and director of your mid-size firm's pension fund management team located in Cincinnati, OH. Before you have even had the opportunity to settle into your new office, your senior vice president tapped you to take her place and present an investment seminar to "a group of investment decision-makers" comprised of government analysts from all over the tri-state area but that is the extent of the information you've been provided. After doing some quick research, you've identified that the specific target audience for this presentation is composed primarily of individuals with little or no professional investment experience who are attending this seminar to build their skills.

In order to address the range of information these individuals need to know and the likely range of questions that may crop up, you'll need to be able to:

  1. Describe the essential characteristics of a bond and how these characteristics interact to determine bond value, inclusive of how both the interest rate and coupon rate influence bond value and pricing.
  2. Summarize call provisions and sinking fund provisions. Explain how these types of provisions individually make bonds more or less risky for a) an investor, and b) the issuer.
  3. The value of an asset whose value is based on expected future cash flows is determined by the present value of all future cash flows the assets will generate. Given the case scenario and target audience provided, select and discuss a simple asset situation that could apply to exemplify this concept.
  4. Define what it means when a bond is callable. Provide two measures you can review to understand what type of returns to expect if the bond is called or if it is not called.
  5. Describe the type of returns one could one expect with a callable bond trading at a premium price and provide your rationale. Explain the significance of the designation "premium price." Discuss why or why not a callable bond trading at a premium price would be an appropriate investment for the target audience's organizations.
  6. Select an example scenario appropriate to the seminar's target audience Write a general expression for the yield on a probable debt security (rd) and define these terms in regards to that hypothetical security: real risk-free rate of interest (r*), inflation premium (IP), default risk premium (DRP), liquidity premium (LP), and maturity risk premium (MRP).
  7. Define the nominal risk-free rate (rRF) and provide an example relevant to your target audience of a specific security that can be used as an estimate of rRF.
  8. Describe interest rate risk and reinvestment rate risk and how these relate to the maturity risk premium. Based on reinvestment rate risk, provide an example on how a 1-year bond or a 10-year bond would be a better investment for a typical community as represented by those attending your seminar.
  9. Select an example appropriate to your seminar target audience to explain the concepts of a) term structure and interest rates and b) yield curve.
  10. Review corporate bankruptcy law. If a firm were to default on its bonds, describe how the company assets could be/would be liquidated. What is a likely outcome for bondholders? Select and describe an example scenario that applies to your seminar attendees' organizations.

Reference no: EM131182080

Questions Cloud

Discuss violation of the efficient market hypothesis : Discuss a violation of the Efficient Market Hypothesis and identify which level of efficiency (weak, semi-strong, or strong) would be violated and why. In your discussion, also indicate whether this situation presents an abnormal return opportunity a..
Variables could lead to different outcomes : What flaws might exist in your calculations, and what variables could lead to different outcomes? What actions could you take ensure you reach your target goal?
Strong form of efficient market hypothesis and weak from : On December 8, 2015, Fortune Magazine posted an article online entitled, “Here Are the Tech Stocks You Should Buy in 2016.” Suppose your friend is considering investing in these 8 companies by purchasing their stocks today. What is a difference betwe..
Create an architecture design : Pretend that the company is about to create a new application to support retail sales over the web. Create an architecture design that depicts the locations that would include components that support this application.
Essential characteristics of a bond : Describe the essential characteristics of a bond and how these characteristics interact to determine bond value, inclusive of how both the interest rate and coupon rate influence bond value and pricing.
Which goods and services would you buy less : Suppose that your income increases. Which goods and services would you buy more of (i.e., normal goods)? Which goods and services would you buy less of (i.e., inferior goods)?
Discuss antecedents of target marketing : Assignment : Antecedents of Target Marketing- Discuss antecedents of target marketing as they relate to the video case study on Numi Organic Tea.-
Compute companys price-earning ratio and price-to-sale ratio : Compute each company's price-earnings ratio and price-to-sales ratio. Identify primary estimates or assumptions that could result in overstated earnings, and use the ratio data to compare the quality of each company's earnings.
Major elements of the efficient markets hypothesis : Describe the major elements of the Efficient Markets Hypothesis (EMH) theory that create dissention between the worlds of finance and academia in terms of its usefulness. Select a real-world scenario and explain how EMH is either 1) currently used, o..

Reviews

Write a Review

Business Management Questions & Answers

  Caselet on michael porter’s value chain management

The assignment in management is a two part assignment dealing 1.Theory of function of management. 2. Operations and Controlling.

  Mountain man brewing company

Mountain Man Brewing, a family owned business where Chris Prangel, the son of the president joins. Due to increase in the preference for light beer drinkers, Chris Prangel wants to introduce light beer version in Mountain Man. An analysis into the la..

  Mountain man brewing company

Mountain Man Brewing, a family owned business where Chris Prangel, the son of the president joins. An analysis into the launch of Mountain Man Light over the present Mountain Man Lager.

  Analysis of the case using the doing ethics technique

Analysis of the case using the Doing Ethics Technique (DET). Analysis of the ethical issue(s) from the perspective of an ICT professional, using the ACS Code of  Conduct and properly relating clauses from the ACS Code of Conduct to the ethical issue.

  Affiliations and partnerships

Affiliations and partnerships are frequently used to reach a larger local audience? Which options stand to avail for the Hotel manager and what problems do these pose.

  Innovation-friendly regulations

What influence (if any) can organizations exercise to encourage ‘innovation-friendly' regulations?

  Effect of regional and corporate cultural issues

Present your findings as a group powerpoint with an audio file. In addition individually write up your own conclusions as to the effects of regional cultural issues on the corporate organisational culture of this multinational company as it conducts ..

  Structure of business plan

This assignment shows a structure of business plan. The task is to write a business plane about a Diet Shop.

  Identify the purposes of different types of organisations

Identify the purposes of different types of organisations.

  Entrepreneur case study for analysis

Entrepreneur Case Study for Analysis. Analyze Robin Wolaner's suitability to be an entrepreneur

  Forecasting and business analysis

This problem requires you to apply your cross-sectional analysis skills to a real cross-sectional data set with the goal of answering a specific research question.

  Educational instructional leadership

Prepare a major handout on the key principles of instructional leadership

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