Reinvestment risk, Financial Management

Assignment Help:

Reinvestment risk is the risk involved in reinvesting the proceeds received from the issuer against callable bonds. During falling interest rate periods, investor cannot reinvest at the same interest rates at which the earlier incomes were reinvested. In these situations, zero-coupon bonds are at an advantageous position as far as investors are concerned as the issuer reinvests the incomes. Higher the coupon on the bond, higher will be the reinvestment risk since the investors may go in for speculative investments.


Related Discussions:- Reinvestment risk

State about the financing mbo, State about the Financing MBO There are ...

State about the Financing MBO There are many sources of finances available for an MBO Venture capitalists Merchant banks Institutional investors such as pension funds

Available bid capacity for a bidder, A vailable bid capacity We saw th...

A vailable bid capacity We saw the criterion that qualifies the bidder. Now we will learn about the bid capacity. There are chances that a bidder might acquire more contrac

Participants in hedge funds, Participants in Hedge Funds: The Sponsor ...

Participants in Hedge Funds: The Sponsor and the Investors Sponsors are promoters and generally, they hold a profit share on percentage for the capital invested in the Fun

Explain about temporary or variable working capital, Q. Explain about Tempo...

Q. Explain about Temporary or Variable Working Capital ? Temporary or else Variable Working Capital - Any amount over and above the permanent level of working capital is called

Explain the types of debt securities, Explain the Types of Debt Securities ...

Explain the Types of Debt Securities There are many types of debt securities available in market.  The range includes Government Securities, Deep discount bonds, Deben

Financial equivalent of the balance, The Federal Minister for the Environme...

The Federal Minister for the Environment is worried about the Greenhouse Effect, one outcome of which would be that Adelaide would have a subtropical climate by the year 2015. This

Assessing creditworthiness of an issuer of bond, Following are the areas an...

Following are the areas an analyst should consider while assessing the creditworthiness of an issuer. 1. Security Limitations: The bond indenture shoul

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 the basis risk, Explain the Basis Risk Basis risk considers to ...

Explain the Basis Risk Basis risk considers to the floating rates of two counterparties being pegged to two dissimilar indices.  In this situation, as the indexes are not compl

Describe historical cost and future costs, Q. Describe Historical cost and ...

Q. Describe Historical cost and future costs? Historical cost and future costs: another problem in the determine of cost of the capital arise on the accounts of the difference

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