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

How long until I get the results of my order

Cash and Bonus Issue - Dividend For a firm to pay cash dividends, it should contain adequate liquid funds.Though, under conditions of liquidity and financial constraints, a fi

capital structure of 38% common stock and 62% debt. A debt issue of 1000 par value, 5.6% bonds that mature in 15 years and pay annual interest will sell for $979.dividends have gro

Compare the three investments below in terms of their riskiness. What is the best way to evaluate the riskiness of an investment given the information you have on them?

How would you explain the value of financial planning to friends or family? Which topics will you discuss with children in your life? Which topics do you feel are most imp

Mortgages - Financial Institutions An arrangement of the property being purchased provides the security for funding. Other assets may be employed like security for funding o

give an introduction about stock exchage in india,,includig BSE

1. A stock pays no dividend and is expected to be sold for $50 after 4 years. If the investor's RRR is 12%, at what price is he/she willing to buy it? 2. ABC company has its ROE

Preparing Contract Note in the Stock Exchange Clerk takes the details of the day's transaction to the broker at the end of working day. Broker scrutinizes all transactions o