Extendible reset bonds, Financial Management

Assignment Help:

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.


Related Discussions:- Extendible reset bonds

Theoretical spot rates, The theoretical spot rates for treasury secur...

The theoretical spot rates for treasury securities represent the appropriate set of interest rates that should be used to value the risk from default-free cash fl

Find out the price of equity shares., Following details are related to thre...

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

Motivate the actions of a firms financial manager, Q. What goals should alw...

Q. What goals should always motivate the actions of a firm's financial manager and why? Answer:   Please note that a minimum of 250 words is required on all responses to the d

Long currency straddle, If the future spot rate of euro at option expiratio...

If the future spot rate of euro at option expiration is uncertain and takes a value within a range of $0.95 to $1.10, construct a contingency graph for a long currency straddle and

Explain about the non-convertible debentures, Expalin about the Non-Convert...

Expalin about the Non-Convertible Debentures (NCDs) NCDs are plain debenture securities issued by corporations. They are normally medium term in nature, maturing between 1 to 8

Liquidity mix, I am facing some problems in my assignment of Liquidity Mix....

I am facing some problems in my assignment of Liquidity Mix. Can anybody suggest me the proper explanation for it?

Accrued interest, When an investor buys a bond in between coupon paym...

When an investor buys a bond in between coupon payments, he is supposed to compensate the seller with the coupon interest earned on the bond from the last coupon

Working capital financing, Do you guys provide Working Capital Financing as...

Do you guys provide Working Capital Financing assignment help? I need writing a report on Working Capital Financing and it is about 2000 words. Let me know. I need to buy your solu

Calculate annual payments into a savings account, Calculate annual payments...

Calculate annual payments into a savings account: Mr. Jones intends to retire in 20 years at the age of 65. As, yet he has not provided for retirement income, and he wants to

What is rectification of errors, Principles of Financial Accounting and Man...

Principles of Financial Accounting and Management 1. Define Accounting. Briefly explain the ‘Entity Concept' and ‘Money Measurement Concept' of accounting. 2. What is rectif

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