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

    What do you signify by risk analysis in capital budgeting, Q. What do you s...

    Q. What do you signify by Risk Analysis in Capital Budgeting? Risk Analysis: - Risk in an investment demotes to the variability that is likely to observe between the estimated

    What is capital rationing, What is capital rationing? Should a firm practic...

    What is capital rationing? Should a firm practice capital rationing? Why? Capital rationing is the practice of putting dollar limits on what will be invested in new capital bud

    Coefficient of determination, Coefficient of Determination As before, ...

    Coefficient of Determination As before, Where, We can show that TSS = RSS + ESS We can also show that F = is an F distr

    Need for credit and its nature, Need for Credit and its nature On the d...

    Need for Credit and its nature On the demand side of the economy are the consumers of goods and services who require funds basically for acquiring certain consumer durables. Th

    Cash dividends factors that decided by stockholders, What are some of the f...

    What are some of the factors that common stockholders consider when deciding how much, if any, cash dividends they desire from the corporation in which they have invested? Gene

    Define differences between foreign bonds and eurobonds, Describe the differ...

    Describe the differences between foreign bonds and Eurobonds.  Also discuss why Eurobonds make up the lions share of the international bond market. Answer:  The two segments of t

    Types of treasury bills, Types of Treasury Bills Treasury bills are iss...

    Types of Treasury Bills Treasury bills are issued at various maturities, generally up to one year. Thus, they are useful in managing short-term liquidity. At present, the GOI (

    Measuring interest rate risk , Investors are always interested in est...

    Investors are always interested in estimating the price sensitivity of a bond to change in market interest rates. Let us study how prices change both in terms of

    Explain and compare forward vs. backward internalization, Explain and compa...

    Explain and compare forward vs. backward internalization. Forward internalization takes place when MNCs with intangible assets make FDI in order to use the assets on a larger sca

    Limitation of weighted average cost of the capital, Q. Limitation of weight...

    Q. Limitation of weighted average cost of the capital? 1) Determine the Weight; the first and foremost difficulty in computing the average cost is to an easy job. This type of

    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