fi means finanicial
co means controlling
Ratio analysis is a tool used by management and fundamental investors to determine a company's general position in an industry or sector as it compares to their peers. An example would be the current ratio, which equals the current assets of a company divided by the current liabilities of which the firm is obligated. The current ratio gives investors and management a quick look as to how liquid a firm is. A large proportion of current assets to liabilities indicates a firm will have little trouble meeting its short term obligations regardless of the economic cycle. The analysis may extend to industry peers to compare companies on an apples to apples basis.
Preference share holders have the highest preference of getting their investment bank when the company goes bankrupt. The company has fulfill its obligation by selling its assets. Here the preference first comes to preference share holders and then debenture holders and then equity
premium=(1-Recovery Rate)*(probability of default)
so if the premium is 15% and the recovery rate is 30%, then you can calculate the likelihood or probability of default.
It would be (.15)=(1-.30)*probability
Rearranging terms you get: probability=.21428
The Recovery Rate is the percentage of your original asset you'd recover under the default circumstance.
A credit rating is an independent assessment of the creditworthiness of a bond (note or any security of indebtedness) by a credit rating agency. It measures the probability of the timely repayment of principal and interest of a bond. Generally, a higher credit rating would lead to a more favorable effect on the marketability of a bond. The credit rating symbols (long-term) are generally assigned with "triple A" as the highest and "triple B" (or Baa) as the lowest in investment grade (See below for definition of rating grades). Anything below triple B is commonly known as a "junk bond."
Established rating agencies are for example Standard&Poors or Moodys.
It should be noted that the credit rating of a bond tells you nothing about the probability of losing money from changes, especially declines, in the bond's market value. A bond may not actually default but if many investors are concerned that it might then it's market value will decline sharply. This will bring substantial unrealised losses for those who still hold the bond. Many of these holders will now be sufficiently alarmed about the default risk inherent in continuing to hold the bond that they will sell, sometimes at almost any price, thus crystallising their losses. For more see the Corporate Bonds blog at www.davidandgoliathworld.com
the companies that have issued debentures in recent years.give suggestions to make debentures more popular?
If the 2 5 years are exactly the same with the exception of having coupons (same lender, same claims, same everything) then yes you should be able to. The trick is finding the right yield curve and discounting everything back to the present value. The coupons can be treated as mini zero-coupon bonds in their own right.
If you are a B.Com or M.Com student you can very easily pass the written.... Here only 3 subjects and it is objective type questions....
1. Reasoning & arithmetic for 10 marks
2. Finance & Account for 40 marks (Technical)
3. English for 10 marks
This is the question paper pattern
In interview 2nd round is technical for this round B.Com is must otherwise they will reject the candidate if the candidate have skills also they will not take...... and one of my friend has selected 2 times for Capital IQ she qualified the written test and 1st round in interview in 2nd round also she qualified but she did BA and she don't have B.Com that's y they rejected her
Generally, bond risk refers to the possibility that the issuer will default (not repay). This is also called "credit risk" or "repayment risk". In a addition, bonds face "Interest Rate Risk", rising interest rates will make the value of a set of fixed future cashflows decline in current value. These are the 2 core risks faced.
In addition to credit risk, there are other risks associated with bonds, just as there are risks with owning any asset. Every asset has some risk whether that's your house, car, art collection, stocks or that baseball card collection in your attic. Bonds are no different. Some of the more common risks associated with bonds are credit risk (discussed above), interest rate/ market risk, call risk, liquidity risk and regulatory risk.
To determine credit risk, investors often look to a bond's rating, issued by independent ratings agencies such as Moody's, Fitch and Standard & Poors. The safest bond (in terms of repayment risk) is AAA-rated, and includes US Government debt and some highly rated corporate debt. A corporate or government bond issue rated AA or A+ is generally considered a safe investment. One rated BB or B- is riskier. Bond yields reflect this risk and generally lower rated bonds have higher yields than those of better credit quality.
Added by Stox723......There is another risk of Bond ownership. It is called "Opportunity Cost." This means that if you invest in a 10 year 5% Bond, you will receive 5% interest payments for 10 years. If you invest, lets say $10,000 in a Bond you will receive $500 per year in interest (usually paid semi-annually). Opportunity cost means that for this specific $10,000 there were other possible investments which you now cannot buy into with this money. The difference between the $500 earned and the income from the other possible investment is your opportunity cost.
Added by Beaufer99 (www.davidandgoliathworld.com). Aside from Default risk as described above, the important risks to an investor from holding bonds are as follows.
A debenture is an unsecured loan you offer to a company. The company does not give any collateral for the debenture, but pays a higher rate of interest to its creditors. In case of bankruptcy or financial difficulties, the debenture holders are paid later than bondholders. Debentures are different from stocks and bonds, although all three are types of investment. Below are descriptions of the different types of investment options for small investors and entrepreneurs.
Debentures and Shares
When you buy shares, you become one of the owners of the company. Your fortunes rise and fall with that of the company. If the stocks of the company soar in value, your investment pays off high dividends, but if the shares decrease in value, the investments are low paying. The higher the risk you take, the higher the rewards you get.
Debentures are more secure than shares, in the sense that you are guaranteed payments with high interest rates. The company pays you interest on the money you lend it until the maturity period, after which, whatever you invested in the company is paid back to you. The interest is the profit you make from debentures. While shares are for those who like to take risks for the sake of high returns, debentures are for people who want a safe and secure income.
What is a Debenture?
A Debenture is a debt security issued by a company (called the Issuer), which offers to pay interest in lieu of the money borrowed for a certain period. In essence it represents a loan taken by the issuer who pays an agreed rate of interest during the lifetime of the instrument and repays the principal normally, unless otherwise agreed, on maturity.
These are long-term debt instruments issued by private sector companies. These are issued in denominations as low as Rs 1000 and have maturities ranging between one and ten years. Long maturity debentures are rarely issued, as investors are not comfortable with such maturities
Debentures enable investors to reap the dual benefits of adequate security and good returns. Unlike other fixed income instruments such as Fixed Deposits, Bank Deposits they can be transferred from one party to another by using transfer from. Debentures are normally issued in physical form. However, corporates/PSUs have started issuing debentures in Demat form. Generally, debentures are less liquid as compared to PSU bonds and their liquidity is inversely proportional to the residual maturity. Debentures can be secured or unsecured.
What are the different types of debentures?
Debentures are divided into different categories on the basis of: (1)convertibility of the instrument (2) Security
Debentures can be classified on the basis of convertibility into:
· Non Convertible Debentures (NCD): These instruments retain the debt character and can not be converted in to equity shares
· Partly Convertible Debentures (PCD): A part of these instruments are converted into Equity shares in the future at notice of the issuer. The issuer decides the ratio for conversion. This is normally decided at the time of subscription.
· Fully convertible Debentures (FCD): These are fully convertible into Equity shares at the issuer's notice. The ratio of conversion is decided by the issuer. Upon conversion the investors enjoy the same status as ordinary shareholders of the company.
· Optionally Convertible Debentures (OCD): The investor has the option to either convert these debentures into shares at price decided by the issuer/agreed upon at the time of issue.
On basis of Security, debentures are classified into:
· Secured Debentures: These instruments are secured by a charge on the fixed assets of the issuer company. So if the issuer fails on payment of either the principal or interest amount, his assets can be sold to repay the liability to the investors
· Unsecured Debentures: These instrument are unsecured in the sense that if the issuer defaults on payment of the interest or principal amount, the investor has to be along with other unsecured creditors of the company.
Eamon De Valera The Irish revolutionary leader and statesman Eamon De Valera (1882-1975) served as prime minister and later president of Ireland (1959-1973). Eamon De Valera was born in New York City on October 14, 1882. In 1885, after the death of his Spanish father, he was sent to live with his Irish mother's family in Country Limerick. He graduated from the Royal University of Ireland in 1904 and became a mathematics teacher
Bonds and stocks serve different purposes to the investor, and ideally you should buy both.
Advantage of investment-grade bonds: the issuer is committed to paying you a stated amount of money on a stated date. The disadvantage is your return is limited to the agreed-on amount.
Advantage of stocks: potentially unlimited return on your investment. The disadvantage is there are no guaranteed returns with stocks; you could potentially lose everything you invested in them.
Speculative-grade bonds, or "junk bonds," have a risk/reward system more like stocks than investment-grade bonds.
InterNotes are types of investments ("bonds") that have certain characteristics that make them particularly attractive for banks and financial advisors to sell to their retail and private banking customers. The term "InterNotes" specifically applies to the registered brand name that Incapital LLC applies to bonds issued by a wide range of corporations and banks who have agreed to issue these investments using its underwriting and distribution platform. Refer to www.incapital.com, www.internotes.com, www.incapitaleurope.com & www.eurointernotes.com for further information and documentation.
Go to www.everbank.com and go to the foreign currency deposit section. Icelandic Krona deposit is roughly or equilavent to the the bonds' interest rate.
There is an inverse relationship between price and yield: when interest rates are rising, bond prices are falling, and vice versa. The easiest way to understand this is to think logically about an investment. You buy a bond for $100 that pays a certain interest rate (coupon). Interest rates (coupons) go up. That same bond, to pay then-current rates, would have to cost less: maybe you would pay $90 the same bonds if rates go up. Ignoring discount factors, here is a simplified example, a 1-year bond. Let's say you bought a 1-year bond when the 1-year interest rate was 4.00%. The bond's principal (amount you pay, and will receive back at maturity) is $100. The coupon (interest) you will receive is 4.00% * $100 = $4.00. Today: You Pay $100.00 Year 1: You receive $4.00 Year 1 (Maturity): You Receive $100 Interest Rate = $4.00 / $100.00 = 4.00% Now, today, assume the 1-year interest rate is 4.25%. Would you still pay $100 for a bond that pays 4.00%? No. You could buy a new 1-year bond for $100 and get 4.25%. So, to pay 4.25% on a bond that was originally issued with a 4.00% coupon, you would need to pay less. How much less? Today: You Pay X Year 1: You Receive $4.00 Year 1 (Maturity): You Receive $100 The interest you receive + the difference between the redemption price ($100) and the initial price paid (X) should give you 4.25%: [ ($100 - X) + $4.00 ] / X = 4.25% $104 - X = 4.25% * X $104 = 4.25% * X + X $104 = X (4.25% + 1) $104 / (1.0425) = X X = $99.76 So, to get a 4.25% yield, you would pay $99.75 for a bond with a 4.00% coupon. In addition to the fact that bond prices and yields are inversely related, there are also several other bond pricing relationships: * An increase in bond's yield to maturity results in a smaller price decline than the price gain associated with a decrease of equal magnitude in yield. This phenomenon is called convexity. * Prices of long term bonds tend to be more sensitive to interest rate changes than prices of short term bonds. * For coupon bonds, as maturity increases, the sensitivity of bond prices to changes in yields increases at a decreasing rate. * Interest rate risk is inversely related to the bond's coupon rate. (Prices of high coupon bonds are less sensitive to changes in interest rates than prices of low coupon bonds. Zero coupon bonds are the most sensitive.) * The sensitivity of a bond's price to a change in yield is inversely related to the yield at maturity at which the bond is now selling.
YES, a company can issue its debentures with a pari passu clause when they are issued in series. This implies that the debentures shall be paid proportionately. This assumes an added advantage when the company is short of cash & does not have the amount to make payment for debentures.In such case, all the debentures held by a creditor of the company ranked equal as regard charge and repayment with the others of that series.
However, a company cannot give this right tto its new debentureholder of its old debentures unless it is expressly authorised to do so.
The left bit.
The Bond price is the amount of the bond when it becomes mature. The coupon rate is the amount of interest payable on the bond.
Bonds have three major components
The first is the face value (also called par value). This is the value of the bond as given on the certificate or instrument. This is the value the bond holder will receive at maturity unless the issuer defaults. If bonds are retired before maturity, bond holders may receive a slight premium over face value. Investors pay par when they buy the bond at its original face value. The price investors pay may be more or less than the face value.
Bonds also have a coupon rate. This is the annual rate of interest payable on the bond. For the owner of a bond, the higher the coupon rate, the higher the interest payments the owner receives. The rate is set at the time the bond is issued and generally does not change. Most bonds make interest payments semiannually, although some bonds are offered with monthly and quarterly payments.Did you know?
Until 1983, all bond owners received an actual paper bond certificate.
This inspired bond terminology. The loan amount appeared prominently on the face of the bond. Bonds included coupons that the owner detached, one
Price and interest rate on a bond are inversely related, if the bond price is low, rate will be high, if the bond price is high, interest rate will be lower.
1. Interest rate at any given time. A. as determined by market factors. B. Influenced by Federal reserve. 2. time to maturity. short,intermediate, or long term. 3. Coupon, rate of interest at the time of issuance.
Also of importance is whether or not the bond is Callable.
That is redeemable by the issuer prior to the original maturity date.
This usually occurs when current interest rates are below those that existed when the
bond was unwritten. In this case the company no longer has to pay the high interest rate (having bought back the original bonds from the current holders) and can issue new bonds (at the assumed lower current rate).
The disadvantage for the holder of the bonds being called(bought back) is that he/she is no longer earning a high interest rate and now has capital that if were to be
reinvested in bonds would be earning a lower interest rate than before.
Thus a callable bond can be considered as having a potential interest rate risk.
Yield usually refers to yield to maturity. If a bond is trading at par it usually means the yield to maturity is equal to the coupon.
How they should be used in fundraising in relation to the possible financial distress?
what is the difference between stocks,shares and bonds
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