Extendible reset bonds, Financial Management

Extendible reset bonds are floaters in which the issuer is required to reset the coupon rate so that the issue will trade at a predetermined price (usually above the face value). The coupon rate of this type of floaters is based on the margin required by the market at the reset date for the security to trade at par value. On the reset date, the coupon rate is usually calculated as the average of rates suggested by two investment banking firms. The new rate not only reflects the level of interest rate at the reset date, but also the margin required by the market on the reset date.

For example, assume that the formula for extendible reset bond is 5.5% of MIBOR plus 125 basis points. At coupon reset date, investment bankers suggest that a margin of 150 basis points is to be maintained for the bond to trade above par. Based on the suggestion of the investment bankers, on reset date, the issuer resets the coupon rate to 5.5% of MIBOR plus 150 basis points.

Posted Date: 9/8/2012 5:24:34 AM | Location : United States







Related Discussions:- Extendible reset bonds, Assignment Help, Ask Question on Extendible reset bonds, Get Answer, Expert's Help, Extendible reset bonds Discussions

Write discussion on Extendible reset bonds
Your posts are moderated
Related Questions
Application: Critiquing a Qualitative, Quantitative, or Mixed-Methods Study Over the last several weeks you have explored many qualitative, quantitative, and mixed-methods rese

What is Global Depository Receipts American / Global Depository Receipts (ADRs/ GDRs) Equity shares which are offered in international markets to international investors a

Suppose that Harry and Steven make their living selling contraband at opposite ends of a town that is 1 mile long. Because it's a crowded city, the citizens use taxi-cabs for trans

Following details are related to three companies which are identical except in terms of ''r''. Company ABC Ltd. MNC Ltd. XYZ Ltd. Cost of capital 10% 10% 10% Earn per

Question: (a) An efficient financial market is assumed to hold under the Capital Asset Pricing Model (CAPM). What is the main hypothesis of an efficient financial market? (

Your quantitative analysis will describe the financial strength of you company using the metrics we discussed in class. You may use other measures at your discretion, but the follo



•What categories and in what amounts should Jenny allocate her funds to reflect a balanced monthly budget? Include the main categories as well as examples of other categories.

Meaning merits nd demerits of modern approch of financial management