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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."
Define the market segmentation of the term structure of interest rates. Market segmentation: And also the investors’ expectations regarding future interest rates and thei
Functions of a Stock Exchange The stock exchange is a market place where investors trade in securities. It is a competitive market involving large numbers of buyers and sellers
Example: - Two firm U as well as L is identical in every respect except that U is unlevered and L is levered. L has Rs. 20Lakh of 8% debt outstanding. The net operating income of b
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Evaluation of change in credit policy Current average collection period = 30 + 10 = 40 days Current accounts receivable = 6m × 40/ 365 = $657534 The Average collection pe
calculation of depreciation of long lived assets in times of inflation
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Q. Show the Present Value of a Single Flow ? Discounting or else Present Value of a Single Flow (Lump Sum):- We are able to determine the PV of a future cash flow using the for
Expalin the basic concept of financial management and Cost of Retained Earnings and External Equity??? Also explain the hoe can ew calculate the external equity? Help me
Q. Describes Net Operating Income Approach to Capital Structure? NOI (Net Operating Income Approach):- This is another speculation of capital structure which is propounded by '
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