Using present value to value bonds A bond‚ from the perspective of the person issuing the bond is a form of long term debt. In the hands of the person who has acquired the bond it is an asset. The agency issuing the bond agrees to pay a fixed sum of money to the holder of the bond for a period of years and then‚ at the end of that period‚ to pay back the face value of the bond. Bonds can be issued by a variety of agencies/companies: 1. Municipal bonds: issued by cities‚ states and
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90‚000 Share of dividends (.25 × $160‚000) (40‚000) Balance in investment account $550‚000 2)During 2008‚ PK Co. purchased 2‚000‚ $1‚000‚ 9% bonds. The carrying value of the bonds at December 31‚ 2010 was $1‚960‚000. The bonds mature on March 1‚ 2015‚ and pay interest on March 1 and September 1. PK sells 1‚000 bonds on September 1‚ 2012‚ for $988‚000‚ after the interest has been received. PK uses straight-line amortization. The gain on the sale is Discount amortization: $40
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CONTENTS Introduction of bonds……………………………………………..01 Characteristics of Bonds…………………………………………01 Types of Bonds…………………………………………………… 06 Bonds Market……………………………………………………… 08 Introduction of Pakistan bond market……………...................08 How Bonds Trade……………………………………………….….09 Bond Price Variations……………………………………………..09 Bond valuation…………………………………………..................09 Types of bonds trade in Pakistan……………………………….10 Government Debt Securities……………………………………..10 Characteristics of MTBs and PIBs………………………………12
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covered call options on the resources of the different countries that need the funds. An options strategy is when an investor holds a long position (owns the asset: in our case mineral) in an asset and writes (sells) call options on that same asset in an attempt to generate increased income from the asset. This strategy is often employed when an investor has a short-term neutral view on the asset and for this reason holds the asset long and simultaneously have a short position via the option to generate
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10 Bond Prices and Yields 1. a. Catastrophe bond: Typically issued by an insurance company. They are similar to an insurance policy in that the investor receives coupons and par value‚ but takes a loss in part or all of the principal if a major insurance claim is filed against the issuer. This is provided in exchange for higher than normal coupons. b. Eurobond: They are bonds issued in the currency of one country but sold in other national markets. c. Zero-coupon bond: Zero-coupon bonds are
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activities of the corporation are entrusted to them. Guaranteed Stocks-Stock of corporation wherein the payment of dividends is guaranteed by another corporation. Debenture Stock- not stock in the real sense‚ but a debt issue similar to debenture bonds. They are fixed interest securities issued by limited
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Convertible Bonds A convertible bond is a bond that can be converted into shares of common stock. Therefore‚ these are two sources of value for this security: the value of the bond components‚ and the value from possibly converting the security into shares of common stock. Features of a Convertible Bond The basic features of a convertible bond can be illustrated by a hypothetical example. On November 1‚ 2003 ("today")‚ Apple‚ had $400 million in 8.80 percent (annual payments) convertible bonds due in
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Options & Futures I. Introduction to Derivatives Prof. Domenico Cuoco Term 5‚ 2013 What is a Derivative? Basic Types of Derivatives The Market for Derivatives Outline 1 What is a Derivative? 2 Basic Types of Derivatives 3 The Market for Derivatives Options & Futures‚ Prof. Domenico Cuoco‚ 2013 I. Introduction to Derivatives 2 What is a Derivative? Basic Types of Derivatives The Market for Derivatives What is a Derivative? Derivatives and Contingent
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the price of another asset. This means that financial derivatives are instruments whose price or value is not determined directly but depend on the price of another asset which we call the underlying asset. The underlying asset can be a stock‚ a stock index‚ a commodity or any other financial asset such as currencies‚ bonds and interest rates. The main function of the derivatives market is to provide financial investment instruments and provide for adequate coverage of risk management. Among the most
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BONDS Bonds pay fixed coupon (interest) payments at fixed intervals (usually every six months) and pay the par value at maturity. Par value = $1‚000 Coupon = 6.5% or par value per year‚ or $65 per year ($32.50 every six months). Maturity = 28 years (matures in 2032). Issued by AT&T. Types of Bonds Debentures - unsecured bonds. Subordinated debentures - unsecured “junior” debt. Mortgage bonds - secured bonds. Zeros - bonds that pay only par value at maturity; no coupons. Junk bonds - speculative or
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