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

    Dividend payout ratio, Dividend Payout Ratio The percentage of earnings...

    Dividend Payout Ratio The percentage of earnings or profit paid to shareholders in dividends. Computed as:   The payout ratio gives an idea about how well earning

    Operating cycle, discuss the applicability operating cycle considering broi...

    discuss the applicability operating cycle considering broilers in uganda?

    How do risk-averse investors compensate, How do risk-averse investors compe...

    How do risk-averse investors compensate for risk when they take on investment projects? For the reason of risk aversion, people demand elevated rates of return for taking on hi

    Describe the types of hazards that is found in z department, Z works for HS...

    Z works for HS Company and has been asked to undertake an assessment of any health and safety issues that might be potential hazards in the department which she manages. Z's respon

    Evaluate certainty equivalent coefficient, Q. Evaluate Certainty Equivalent...

    Q. Evaluate Certainty Equivalent Coefficient? Illustration: - Presume the risky cash flow is Rs. 200000 and the riskless cash flow is Rs. 140000. The Certainty Equivalent Co

    Analyse the company capital structure, 1. Analyse the company's capital str...

    1. Analyse the company's capital structure and critically assess different types of financing options available to the company. Calculate the cost of these different types of finan

    What are the reasons for mergers and acquisitions, Reasons for mergers an...

    Reasons for mergers and acquisitions The key reasons for mergers and acquisitions, is to maximise shareholder wealth otherwise it wouldn’t be worthwhile. R

    How to find value of zero-coupon bond?, Illustration  Find ...

    Illustration  Find out the value of zero-coupon bond when maturity value is Rs.1,00,000, discounting rate is 12%, and the period is 25.  Then,

    Stock market indicators, Stock Market indicators: Stock indices can be ...

    Stock Market indicators: Stock indices can be organized by weighting the sample of stocks. The stock indicators can be of four types: price-weighted average, volume-weighted av

    Bond ., The salem company bond currently sells for $955 has a 12% coupon i...

    The salem company bond currently sells for $955 has a 12% coupon interest rate and $ 1000 par value pays interest annually an

    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