Fixed income securities, Finance Basics

 

Fixed income security can be defined as the financial obligation of an entity (known as the issuer), which promises to pay a specified amount of money on a pre-specified date. Some of the issuers are Central and State Governments, government related agencies, municipal bodies etc.

Fixed Income Securities can be broadly divided into two categories: debt obligations and preferred stock. The issuer of a debt obligation is usually known as a borrower. The investor who purchases these securities is known as a creditor. The issuer promises to pay interest amount on periodic intervals and principal amount at the end of the period. Fixed income securities that are debt obligations include bonds, mortgage-backed securities, asset-backed securities, and bank loans. Preferred stock represents an ownership interest in a company.
A preferred stock holder receives dividend payments and has priority over common stockholders while receiving dividend payment and liquidation. In simple terms, a preferred stock is a kind of equity that has characteristics similar to bonds.

Fixed income securities were once considered to be mere investment products. The intention of the investors was long-term, i.e., to hold the bonds up to maturity and receive the interest periodically and the principal on maturity. In the last few decades the world of financial securities has witnessed a lot of changes. With more and more complex financial income securities entering into the market, it has become a difficult task to predict the future cash flows with certainty. Also, the hold-to-maturity investors are being replaced by institutional investors who are active traders in the fixed income securities markets.

Posted Date: 9/8/2012 3:53:02 AM | Location : United States







Related Discussions:- Fixed income securities, Assignment Help, Ask Question on Fixed income securities, Get Answer, Expert's Help, Fixed income securities Discussions

Write discussion on Fixed income securities
Your posts are moderated
Related Questions
Example of Capital Structure of a Company Example Company XYZ restricted has the given capital structure as:   10,000 Sh.10 ordinary shares 10,000

Explain about the monetary role of banks. The Monetary Role of Banks: • A bank is a financial intermediary. • Bank reserves are the currency banks hold within their va

FASB Assignment

DO YOU HAVE A SAMPLE BALANCE SHEET

Term Structure of Interest Rates The term structure of interest rate give details the relationship between the term to maturity and interest rates and the differences between

Quetion1: You are earning 5.2 percent on a certificate of deposit. Inflation is running 3.5 percent. What is the real rate of return on your investment? Question2: Search for

Existence of Quantity Discounts Recurrently, the firm is capable to take benefits of quantity discounts.  Since these discounts affect the price per unit, they influence also

Question: A deferred annuity policy is sold to a life aged 45 with the following benefits: • Basic payments start at $30,000 from age 65, increasing by $2,000 each year; •

Explain about the Internal Rate of Return Internal rate of return (IRR) is the rate of discount that makes the present value of all the revenues (cash flows) from the invest

Sole Proprietorship Definition - A sole proprietorship or sole tradership is the oldest and simplest form of business. It is that type of business organization where one person