Debt securities, Financial Management

Assignment Help:
  • Fixed income security is a financial obligation of an entity, which promises to pay a pre-specified amount of money at per-specified date.

  • Debt securities (such as bonds, mortgage-backed securities, asset-backed securities and bank loans) at first sight appear less glamorous and exciting.

  • The face value or nominal value of the debt security can be thought of as the principal amount on which interest is paid by the issuer.

  • Bonds typically pay interest periodically at a pre-specified rate of interest.

  • Accrued income involves the recognition of revenue earned before it is actually received.

  • Embedded Option is part of the structure of a bond that provides right to both the parties (issuer and bondholder) to take action against each other party, as opposed to a bare option, which trades separately from any underlying security.

  • Cap is the restriction on the coupon from increasing; it is an unattractive feature for the investors.

  • There could be a minimum coupon rate specified for a floater. This rate is called a floor.

  • A floater can have both a cap and a floor. This feature is referred to as collar.

  • T-Bills are issued to enable the government to tide over short-term liquidity requirements with maturities varying from a fortnight to a year.

  • Bond indices exist for the reasons of managing portfolios and measuring performance, similar to the NSE, BSE, S&P 500 or Russell Indexes for shares.

  • Conversion ratio is the number which tells how many common shares (or preference stocks) will be received by the bondholder at the time of conversion. It is usually constant over the life of the security and protect against losses caused by the stock splits or large stock dividend.

  • Conversion value is the amount which investors can receive by immediately exchanging their bonds for equity shares and selling these shares at prevailing market price of the common stock.

  • The price at which convertible securities trade in the market is higher that the conversion value and straight value.

  • Call schedule shows the date and corresponding prices at which an issuer can call back bonds.

  • inking fund provisions is a pool of funds set aside to repay the debt. Under this, certain amount of money is kept aside every year from the profits. It is helpful to repay interest and the principal every year or at the end of the period.


  • Related Discussions:- Debt securities

    Rejecting proposed projects when using net present value, What is the decis...

    What is the decision rule for accepting or rejecting proposed projects when using net present value? When going with the net present value decision rule any project with a net

    Exam answers, Prepare your recommendation on Agarwal Cast Company

    Prepare your recommendation on Agarwal Cast Company

    Agency theory, AGENCY THEORY An agency relationship may be defined as a...

    AGENCY THEORY An agency relationship may be defined as a contract under which one or more people (the principals) hire another person (the agent) to perform some services on th

    Dow jones global index (djgi), Dow Jones Global Index (DJGI) The DJGI a...

    Dow Jones Global Index (DJGI) The DJGI aims to cover 95% of market capitalisation at country level. As with FTSE and MSCI, there are the same 23 developed markets, but with gre

    Price of equity shares, please give us the formula of price of equity share...

    please give us the formula of price of equity shares of walter''s and gordon''s model

    Irr, #question how to collect real irr %..

    #question how to collect real irr %..

    Firms indifference point, help me withh the calculation concept of the poin...

    help me withh the calculation concept of the point where the firm is indifferent

    List a few types of non-price rationing systems, List a few types of non-pr...

    List a few types of non-price rationing systems. (a) Queuing. (b) Favored customers. (c) Rationing coupons.

    PROFIT MAXIMIZATION, what are the arguments in favour of profit maximizat...

    what are the arguments in favour of profit maximization?

    Incremental cost, Incremental Cost The measured change in a firm's cos...

    Incremental Cost The measured change in a firm's cost of production due to an additional activity pursued by the firm. Incremental costs can be measured by the cost difference

    Write Your Message!

    Captcha
    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