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The financial institutions that originate the loans sell a pool of cashflow-producing assets to a specially created third party that is called a Special-Purpose Vehicle (SPV). The SPV is designed to insulate investors from the credit risk of the originating financial institution. The SPV then sells the pooled loans to a trust, which issues interest bearing securities that can achieve a credit rating separate from the financial institution that originates the loan. The typically higher credit rating is given because the securities that are used to fund the securitization rely solely on the cash flow created by the assets and not on the payment promise of the issuer. Monthly payments from the underlying assets - loans or receivables - typically consist of principal and interest, with principal being scheduled or unscheduled. The cash flows produced by the underlying assets can be allocated to investors in different ways. Cash flows can be directly passed through to investors after administrative fees are subtracted, thus creating a "passthrough" security; alternatively, cash flows can be carved up according to specified rules and market demand, thus creating "structured securities."
Call-Put Parity P + S = C + E * [1/(1+i)] ^n where: P = the market price of the put S = the market price of the stock C = the market price of the call
Monitoring and Controlling Budgets: The preparation of budgets is only part of the budget cycle. Once set, an organisation should actively monitor actual revenue and expenditu
Cost of Equity Share Capital (ke) The cost of equity capital is the 'maximum rate of return that the Co. must earn on equity financed portion of its investments in order to go
Xcell engineering is planning to construct a futsal stadium which has 5 courts to be rented out at any point of time. Its initial cost of investment is RM$280,000. It is expected t
Medium-term notes are debt instruments that can be offered continuously to an investor. An agency of the issuer offers these; and these are avai
Q. Compute the dividend policy and the value of the firm? Rate of Return: (i) 15% (ii) 10% (iii)8% Cost of Capital (Ke) = 10% Earning per share (E) = Rs. 10 C
Characteristics of Warrants As mentioned earlier, a warrant is a variant of a call option and gives the holder a certain right to purchase shares of the company at a predetermi
TR has recently been promoted to his first management position. In the past, he very much enjoyed working as part of a team, but is having some difficulty in adapting to his new ro
Question 1 State the key functions of the financial market. Question 2 Define "Bill of exchange". What are its features? Give different types of cheques. Question 3
#question.economic and finanancial environment.
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