Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
A treasury strip can be sold in two parts based on its components. When the investor is empowered with a right to receive the coupon payments on sale of its treasury securities, such component is called a treasury coupon strip; and when the investor is empowered with a right to receive the principal component of the security on its maturity date, such component is called a treasury principal strip. In simple words, the treasury coupon strips are those created out of coupon payments and the treasury principal strips are those created out of the principal amount.
Treasury coupon stripping is the act of detaching the interest payment coupons from the treasury securities and treating the coupons and the treasury securities as two separate securities. Each coupon entitles its owner to receive an amount as prescribed on a specified date. Similarly, the treasury security entitles its owner to call for repayment of its principal amount on its maturity date. These stripped securities offer investors abundant supply, no default risk, and a less risk of being 'called' or 'paid off', before the date of its maturity.
On stripping, the stripped treasury securities and their coupons are known as 'Zero Coupons' or 'Zeros.' Like zero coupon bonds, treasury strips also do not make any interest payments till maturity. The stripped treasury securities and the coupons are sold at a deep discount from their face values. The difference between the purchase price and the maturity vale of the stripped treasury securities is the yield on such securities. The yield on these stripped treasury securities is called as 'treasury spot rate'.
Zero-coupon securities have no reinvestment risk. This facilitates treasury strips of different maturities to provide a superior relationship between yield and maturity than that of securities on the on-the-run treasury yield curve. The absence of reinvestment risk in these stripped securities eliminates the bias arising from the variations in reinvestment risk of the compared securities. Further, the duration of these securities is more or less equal to its maturity. This provides a facility to compare bond issues against treasury strips on the basis of their duration.
These types of securities have more than one coupon rate and each subsequent coupon rate is higher (or lower) than the previous coupon rate. For
One of the well-known soccer clubs in Australia, Sydney, has made a decision to include its players on the club's statement of financial position as assets. These players are signe
how would you judge the potential profit of bajaj electronics on the first year of sales to booth plastics and give your suggestion regarding credit limit.Should it be approved or
Basic Assumptions of Cost of Capital The Cost of Capital is a dynamic concept affected by a multiplicity of economic and firm factors and assumes the following assumptions rela
Rating Symbol Capacity for Timely Repayment Rating Symbol Capacity for Timely Repay
Q. What is the rationale of the double-play strategy? The hedge funds deploy a double-play strategy in order to engineer steep increases in interest rates and steep declines in
Q. What is Unsystematic Risks? Unsystematic Risks stems from a managerial inefficiency, technological change in the production process, availability of raw material, changes in
QUESTION (a) Describe briefly three methods of electronic payment. (b) (i) Explain briefly the term E-Billing. (ii) Outline three advantages of E-Billing. (c) Why is c
Expalin the term Company Objectives Financial management is anxious with making decisions about the provision and use of a firm's finances. A rational method to decision-making
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
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!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd