Fixed income securities, Finance Basics

Assignment Help:

 

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.


Related Discussions:- Fixed income securities

Net present value method - example, Net Present Value Method - Example ...

Net Present Value Method - Example Jeremy limited wishes to expand its output by purchasing a new machine worth 170,000 and installation costs are estimated at 40,000/=.  In t

Debentures of middle asia, Debentures of Middle Asia Reasons behind Un...

Debentures of Middle Asia Reasons behind Unpopularity of Debentures of middle Asia's Financial Market as: i)Their par price is an extremely high value and as such they are

State the realised and expected return, State the Realised and Expected Ret...

State the Realised and Expected Return Return is not as simple a notion as it appears to be as it's not guaranteed, it is mostly expected, and it may or may not be realized.

Cash and marketable securities management, Cash and Marketable Securities M...

Cash and Marketable Securities Management The management of marketable and cash securities is single of the key areas of working capital management. Because cash and marketabl

What are the financial fluctuations, What are the financial fluctuations? ...

What are the financial fluctuations? Financial Fluctuations: a. Financial market fluctuations can be a basis of macroeconomic instability. b. Are markets irrational? c

Operational and financial aspects , In mergers, acquisitions, or other rela...

In mergers, acquisitions, or other relationships between hospitals and physician groups, what are the benefits to each party from entering into an arrangement with the other? What

Example of quantity discounts, Example of Quantity Discounts Consider ...

Example of Quantity Discounts Consider illustration one and suppose that a quantity discount of 5 percent is given whether a minimum 200 units is ordered. Required Fin

Calculate yield to maturity - annual & semi annual payment, 1) Calculate th...

1) Calculate the yield to maturity of a 7-year $1,000 par value bond with an annual coupon rate of 7.5% and a current price of $1,125. Provide the spreadsheet solutions for both 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