CHARACTERISTIC OF BONDS AND STOCKS 1.0 Bonds A bond is a promissory note issued by a business or a governmental unit. Treasury bonds‚ sometimes referred to as government bonds‚ are issued by the Federal government and are not exposed to default risk. Corporate bonds are issued by corporations and are exposed to default risk. Different corporate bonds have different levels of default risk‚ depending on the issuing company ’s characteristics and on the terms of the specific bond. Municipal bonds are issued
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RATES AND BOND VALUATION L E A R N I N G LG1 Describe interest rate fundamentals‚ the term structure of interest rates‚ and risk premiums. LG2 Review the legal aspects of bond financing and bond cost. LG3 LG4 Discuss the general features‚ quotations‚ ratings‚ popular types‚ and international issues of corporate bonds. LG5 LG6 G O A L S Apply the basic valuation model to bonds and describe the impact of required return and time to maturity on bond values. Explain
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Bond Interest and Principal Payments A bond is a type of long-term debt that is issued by a corporation and is purchased by an investor for cash. A formal contract is issued by the corporation that states the legal terms of the bond. The advantages of issuing a bond from a corporation is that the ownership interest of the bondholders will not be diluted and those bonds are available at lower costs than the common stocks available. After a bond is issued by the corporation‚ the bondholder is promised
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Bonds Are Big Reasons the U.S. government might issue bonds are to finance the federal deficit by selling Treasury securities through public auctions. The U.S. government also issues bonds to provide fixed-income securities. Reasons the local government might issue bonds are to better improve things that benefit the community. For example‚ Build‚ repair‚ or improve streets‚ highways‚ hospitals‚ schools‚ and etc. Furthermore‚ bonds are issued to cover the funding of courthouses‚ schools‚ and municipal
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discrepancies in the prices of multiple long maturity US Treasury bonds seemed to appear in the market. An employee of the firm Mercer and Associates‚ Samantha Thompson‚ thought of a way to exploit this opportunity in order to take advantage of a positive pricing difference by substituting superior bonds for existing holdings. Thompson created two synthetic bonds that imitated the cash flows of the 8¼ May 00-05 bond; one for if the bond had been called at the year 2000‚ and one for if it hadn’t been
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their loans. The banks that profit on these interest payments and the businesses use the loans to generate more income for themselves. Since money market accounts are frequently used in mutual funds‚ you can easily enter into buying stock shares or a bond fund. Question #10 Which of the money market securities is the most liquid and considered the most risk free? Why? -The U.S. Treasury Bill or T-bills are sold by the government to raise money. They are the most marketable securities in the money
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INTRODUCTION 1.1 WHAT IS BOND? In finance‚ a bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security‚ under which the issuer owes the holders a debt and‚ depending on the terms of the bond‚ is obliged to pay them interest (the coupon) and/or to repay the principal at a later date‚ termed the maturity. Interest is usually payable at fixed intervals (semi-annual‚ annual‚ and sometimes monthly). Very often the bond is negotiable‚ i.e. the ownership of the
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Advantages & Disadvantages of Preferred Stock & Bonds Deciding to invest is a huge financial step‚ not something to be taken lightly. In deciding which method‚ stock or bonds‚ one has to look at all the angels- the advantages and disadvantages‚ both immediate and long term. Preferred stock has many advantages and disadvantages. Unlike debt‚ preferred stock is flexible. Meaning preferred stock can miss annual payments unlike typical debt. Preferred stock not only is more flexible‚ it also helps
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This examination paper must be returned intact. No part may be removed from the examination room. Family name: …………………………………..…. Other names: ……………………………………… Student ID: …………………………..…………….. AFIN 253 Financial Management MID-SEMESTER TEST: TUESDAY 10th APRIL 2012 Time allowed: 1 hour 30 minutes plus 10 minutes reading time. Instructions 1. Writing is not permitted in reading time. All pens‚ pencils and highlighters must be on your desk. 2. Part A - There are 15 multiple choice questions worth
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adventure began in the early fifties when Ian Lancaster Fleming created the story Casino Royale on his Jamaican property called Goldeneye.1 Fleming transformed popular detective and spy/espionage from the dark‚ through the eye of secret agent 007. James Bond films are about a lady’s man/spy that has dedicated his life to a British intelligence agency called MI6. By utilizing the most technologically advanced spy equipment and specially designed vehicles that can withstand the most torturous conditions
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