...Corporate Bond What Does Corporate Bond Mean? A debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations. In some cases, the company's physical assets may be used as collateral for bonds. Corporate bonds are considered higher risk than government bonds. As a result, interest rates are almost always higher, even for top-flight credit quality companies. Investopedia explains Corporate Bond Corporate bonds are issued in blocks of $1,000 in par value, and almost all have a standard coupon payment structure. Corporate bonds may also have call provisions to allow for early prepayment if prevailing rates change. Corporate bonds, i.e. debt financing, are a major source of capital for many businesses along with equity and bank loans/lines of credit. Generally speaking, a company needs to have some consistent earnings potential to be able to offer debt securities to the public at a favorable coupon rate. The higher a company's perceived credit quality, the easier it becomes to issue debt at low rates and issue higher amounts of debt. Most corporate bonds are taxable with terms of more than one year. Corporate debt that matures in less than one year is typically called "commercial paper". Capital Markets What Does Capital Markets Mean? A market in which individuals and institutions trade financial securities. Organizations/institutions...
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...6 – Bonds and Bond Value 1. The stated interest payment, in dollars, made on a bond each period is called the bond's: A) Coupon. B) Face value. C) Maturity. D) Yield to maturity. E) Coupon rate. Answer: A 2. The principal amount of a bond that is repaid at the end of the loan term is called the bond's: A) Coupon. B) Face value. C) Maturity. D) Yield to maturity. E) Coupon rate. Answer: B 3. The rate of return required by investors in the market for owning a bond is called the: A) Coupon. B) Face value. C) Maturity. D) Yield to maturity. E) Coupon rate. Answer: D 4. The annual coupon of a bond divided by its face value is called the bond's: A) Coupon. B) Face value. C) Maturity. D) Yield to maturity. E) Coupon rate. Answer: E 5. A bond with a face value of $1,000 that sells for less than $1,000 in the market is called a: A) Par bond. B) Discount bond. C) Premium bond. D) Zero coupon bond. E) Floating rate bond. Answer: B 6. A bond with a face value of $1,000 that sells for more than $1,000 in the market is called a: A) Par bond. B) Discount bond. C) Premium bond. D) Zero coupon bond. E) Floating rate bond. Answer: C 7. The long-term bonds issued by the United States government are called: A) Treasury bonds. B) Municipal bonds. C) Floating rate bonds. D) Junk bonds. ...
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...hospitals have physical plant needs (upgrades, renovations, expansions), outstanding bond debts, and pension challenges, all of which require large amounts of capital, which may be most readily available from private equity firms. What are the advantages and disadvantages to a taxpaying entity in issuing debt as opposed to equity? Advantages -Provides a tax shield, Is not dilutive from an ownership standpoint. Better for short-term financing. Issuing debt may be a signal for the company's strength because managers are confident that they won't go into bankruptcy and don't want to dilute existing shares. It can also signal a commitment to increase output to rival firms. Disadvantages - Increases the company's risk level. Company is more sensitive to economic downturns, interest rate variability, and changes in market conditions. Has to be re-paid. There is less risk appetite in making investment decisions as a result. Loan covenants have to be met. Assets may be taken as collateral if the firm cannot pay. . Explain the difference between subordinate debentures and debentures. A subordinated debenture is a bond or debt obligation issued by a corporation that has junior priority status relative to other bondholders of the company in the event of a liquidation or dissolution. Since the claims of subordinated debentures are lower than those of other corporate creditors, they carry greater investment risk. Subordinated debentures are backed or secured only by the full faith and credit...
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...[pic] Master in Business Administration COURSE SYLLABUS Investment Banking And Structured Finance Analytics Course Code: IBSFA Faculty: Prof. E. B. Perez Course Description This is an advanced finance course suited for finance majors. However, the focus is on the practice and business of investment banking. Corporate finance skills are assumed, as well as concepts regarding structured finance. Grading Class Participation 50% Class Presentation 50% Course Outline |Session |Cases, Readings and Exercises | | | | |1 |Case: CML Group, Inc. (A) and (B) | | | | | |Session 1 CML Group, Inc. (A) and (B); the (C) for class distribution. | | |2 Hutchison-Whampoa LTD - Yankee Bond Offering | | |3 Chase's Strategy for Syndicating the Hong Kong Disneyland Loan (A) ...
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...Introduction There are many companies that invest greatly in property, plant and equipment, especially companies that are in capital intensive industries such as the automobile industry. Those companies commit a great amount of their resources or assets to property, plant, and equipment. As a result, investors and creditors are greatly interested in the valuation of those assets. They carefully examine the financial statements of those companies and the valuation methods used to record the assets. Those investors and creditors rely on accountants to report the extent of amount committed to long term assets and to report the proper value of the assets. Cost is the preferred method used to record property, plant or equipment acquisitions. Unfortunately, it is not always easy to record long-term assets. There are different more complicated situations of recording fixed assets such as when recording self-constructed assets. Self-constructed asset is the long lived asset that has been constructed or made by the company itself. There are different costs that are incurred by the company when constructing an asset, and the issue of what costs should be capitalized as part of the asset`s cost arise. Generally it is agreed that all costs or expenses directly related to the construction process should be included as part of the asset`s cost. However, there are controversial issues regarding the assignment of fixed overhead costs and interests. Should any fixed overhead costs be assigned...
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...TRUE/FALSE ____1. A corporation is obligated to make periodic interest payments on a bond and also to repay the bond's principal amount at the maturity date of the bond. ____2. If a corporation liquidates, stockholders have a prior claim over bondholders to corporate assets. ____3. Bonds are quoted in the bond market at a percentage of face value, while stocks are quoted in the stock market in terms of dollars and cents. ____4. A $1,000 face value bond selling at 104 would cost $1,000.40 in the bond market. ____5. The stated rate of interest is the rate prevailing in the bond market at the time the bonds are issued. ____6. If the stated rate of interest is 10% and the market rate of interest is 8%, the bonds will most likely sell at a premium. ____7. The journal entry to record the issuance of $100,000 face value bonds at 102 involves a debit to the Premium on Bonds Payable account for $2,000. ____8. The amortization of a bond premium reduces interest expense on the income statement. ____9. The amortization of $1,000 of bond premium would be recorded by debiting the Premium on Bonds Payable account and crediting the Interest Expense account for $1,000. ___10. The amortization of $1,500 of bond discount would be recorded by debiting the Discount on Bonds Payable account and crediting the Interest Expense account for $1,500. ___11. When bonds are sold between interest dates, the investors must pay the issuing corporation any interest...
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...Investment Vocabulary A Accretion of a Discount: A type of portfolio accounting in which there is a straight-line accumulation of capital gains on discount notes and bonds. Accrued Interest: The interest accumulated on a security since the issue date or since the last coupon payment. The buyer of the security pays the market price plus accrued interest. Active Market: A securities market in which a high volume of trading activity takes place. Advance Refunding: A treasury operation that offers owners of outstanding federal obligations the opportunity to exchange securities for longer-term issues that may bear a higher yield to maturity. Advance refunding on a municipal bond refers to the sale of a refunding issue several years prior to the issue's first call date, with the proceeds being held in trust. Also called prerefunding. Advancing Market: A market in which prices are generally rising. Agent: Executes an order for or acts on behalf of someone else, the principal. The agent, whether a firm or an individual, is subject to the control of the principal and does not have title to the principal's property. The agent may charge a fee or commission for this service. All or None (AON): An all or none order requires that none of the order be executed unless all of it can be executed at the specified price. An AON order usually involves an offering of new securities. American Stock Exchange: A leading securities exchange located in New York City. Also called AMEX or ASE. Amortization:...
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...BA 114.2 FIRST MODULE – 1ST EXAM (23-01-2011) INVESTMENT PROPERTY PAS 40 >property(land or building or part of a building or both) held by an owner or by the lessee under a finance lease to earn rentals (1) or for capital appreciation (2) or both(3) * equipment or movable property can’t qualify as investment property >generates cash flows that are largely independent of the other assets of the entity *Finance lease> transfers substantially all the risks and rewards incident to ownership * lease transfers ownership of asset to lessee by the end of lease term * lessee has option to purchase asset at price lower than FV at date option is exercisable, at the inception of lease, it is reasonably certain option will be exercised * lease term is for the major part of the economic life of asset * at lease inception, PV of minimum lease payments amounts to at least substantially all of the FV of leased asset * lease assets are of specialized nature Investment property is not held for: (a) use in the production/supply of goods/services or for administrative purposes (b) sale in the ordinary course of business OWNER-OCCUPIED PROPERTY > property held by an owner or by the lessee under a finance lease for use in the production/supply of goods/services or for administrative purposes >Fixed asset or Property, Plant & Equipment >generates cash flows that are attributable not merely to the property but also to other assets used in the production/supply...
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...Chapter 19 Initial Public Offerings, Investment Banking, and Financial Restructuring ANSWERS TO END-OF-CHAPTER QUESTIONS 19-1 a. A closely held corporation goes public when it sells stock to the general public. Going public increases the liquidity of the stock, establishes a market value, facilitates raising new equity, and allows the original owners to diversify. However, going public increases business costs, requires disclosure of operating data, and reduces the control of the original owners. The new issue market is the market for stock of companies that go public, and the issue is called an initial public offering (IPO). b. A rights offering occurs when a corporation sells a new issue of common stock to its existing stockholders. Each stockholder receives a certificate called a stock purchase right, or right, giving the stockholder the option to purchase a specified number of the new shares. The rights are issued in proportion to the amount of stock that each shareholder currently owns. c. A public offering is an offer of new common stock to the general public; in other words, an offer in which the existing shareholders are not given any preemptive right to purchase the new shares. A private placement is the sale of stock to only one or a few investors, usually institutional investors. The advantages of private placements are lower flotation costs and greater speed, since the shares issued are not subject to SEC registration. ...
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...Chapter 4: mini case a. What are the key features of a bond? • Par Value • Coupon Rate • Maturity Date • Provisions to Call or Redeem Bonds • Issue Date • Default Risk b. c. What are call provisions and sinking fund provisions? Do these provisions make bonds more or less risky? Bonds that have call provisions allow the firms who issued the bonds to recall (redeem) them back. However, sinking fund provisions allows firms to retire funds in an orderly manner. Firms can retire funds by two ways: 1) they can call in a percentage of bonds each year or 2) they can buy them through the open market. d. How is the value of an asset whose value is based on expected future cash flows determined? It is determined by the present value of all future cash flows the assets will generate. e. How is the value of a bond determined? What is the value of a 10yr, $1000 par value bond with a 10% annual coupon if its required rate of return is 10%? The value of a bond is determined by using the following equation: V b= INT / (1+ rd) 1 + INT / (1+ rd) 2 + … + INT / (1+ rd) n The value of a bond with a 10yr maturity, $1,000 par, 10% coupon rate, and a required rate of 10% is $1000. Hence, the coupon is equal to the required rate; therefore, it’s equal to its par value. |N |PMT |Required |FV |PV | |10 ...
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...A PROJECT ON CAPITAL MARKET GUIDE CERTIFICATE It is hereby certified that the project report on “CAPITAL MARKET”, being submitted by Shelly jumba student of the degree of Master of Business Administration (3rd Sem) of CT Institute of Management and Information Technology, Jalandhar which affiliated to Punjab Technical University, Jalandhar is an original work carried out successfully under my guidance and supervision and that no part of this project has been submitted for any other degree/ diploma. The sincerely efforts put in during the course of investigation is hereby acknowledged. Project guide Miss Shivani jagneja Lect. CTIM& IT DECLARATION This project entitled Empirical Study on “CAPITAL MARKET” is submitted in partial fulfilment of the requirement for the award of degree of master of business administration of Punjab technical university, Jalandhar. .This research work has been done only for MBA only and none of this research work has been submitted for any other degree. The assistance and help during the execution of the project has been fully acknowledged. PREFACE The successful completion of this project was a unique experience for us because by visiting many place and interacting various person, I achieved a better knowledge about this project. The experience which I gained by doing this project was essential at this turning point of my carrier this project is being submitted which content detailed analysis of the research under taken by me...
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...Working Paper 3/2010 Investment Climate Series Investment Climate in Bangladesh: Enhanced Role of the Capital Market Dr. Prashanta K. Banerjee Md. Mohiuddin Siddique Economic Research Group Working paper No: 3/2010 Investment Climate Series Investment Climate in Bangladesh: Enhanced Role of the Capital Market Authors Dr. Prashanta Kumer Banerjee1 Mohiuddin Siddique2 Mentors Mohammad Musa Ph.D3 Farook Chowdhury4 ECONOMIC RESEARCH GROUP JUNE 2010 1 Senior Associate Professor, Bangladesh Institute of Bank Management (BIBM), Dhaka 2 Associate Professor, BIBM, Dhaka 3 Professor of Finance, School of Business, United International University 4 Program Manager, BMB Mott MacDonald, Dhaka. Published By Economic Research Group (ERG), Dhaka, Bangladesh The papers in this series are published as part of contract under the Small Grants Program, implemented by ERG and BMB Mott MacDonald and supported by the Bangladesh Investment Climate Fund (BICF). BICF is managed by IFC, in partnership with the U.K. Department for International Development and the European Union. Details about the program can be found at http://www.ergonline.org/ifc/index_of_SGAPP.html © Dr. Prashanta Kumer Banerjee, Mohiuddin Siddique, 2010 This publication may be reproduced, stored or transmitted for research and academic works without prior permission of the publisher or the author(s) but proper acknowledgement must be given...
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...expansion has occurred in developing markets were they have over 14,000 restaurants, which is nearly double of the nearest competitor. Yum! Brands has been able to position themselves for growth and would be a wise investment due to their long term growth potential. When reviewing data from the financial statements specifically we can see potential in the current ratio and the debt to worth ratios over the last two quarters. Yum brands current ratio for first quarter 2014 stands at 0.84 showing that the companies relative liquidity can handle the majority of their liabilities immediately. When compared to the last quarter of 2013 which stood at 0.75 we can see that liquidity rose by nearly 10 percent. Solvency is also a concern when reviewing possible investments and Yum brands finished the fourth quarter of 2013 with a 74% debt to worth ratio fell to 73% exhibiting growth in shareholder equity. Yum! Brands Debt Security A debt security, also known as fixed income securities, are any debt instrument that is sold or bought between two separate parties and has basic terms that are defined ("Debt," 2014). Terms that are defined are amount borrowed (notional amount), maturity/renewal date, and interest rate (“Debt,” 2014). CD’s, government bonds, municipal bonds, corporate bonds, zero-coupon securities, collateralized securities (such as CMO’s, CDO’s, and...
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...Sample Final Exam Name:___________________________________________ 1. Which of the following are advantages of owning bonds? I. diversification properties II. higher long-term returns than equity holdings III. current income IV. relatively low risk A. I and II only B. I, III and IV only C. I, II and III only D. I, II, III and IV 2. The bond market is considered bearish when A. market interest rates are low or falling. B. market interest rates are high or rising. C. the risk-free rate of return exceeds the required rate of return. D. more bonds are called than issued over a given period of time. 3. The Franklin Company issued a 6% bond three years ago at par value. The market interest rate on comparable bonds today is 5%. The Franklin Company bond currently pays ____ a year in interest and the bond sells at a _____. A. $60; discount B. $60; premium C. $50; discount D. $50; premium 4. At the time you purchase a bond, you know the exact holding period return you will earn if A. the bond is called at any time prior to maturity. B. you resell the bond in exactly one year from the date of purchase. C. the market rate of interest declines within the next year. D. you hold the bond to maturity. 5. Which one of the following combination of features causes bond prices to be the most volatile? A. low coupon, short maturity B. high coupon, short maturity C. low coupon, long maturity D. high coupon, long maturity 6. Which of the following...
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...BUS 405(Principles of Investment) Complete Class IF You Want To Purchase A+ Work Then Click The Link Below , Instant Download http://hwnerd.com/BUS-405-Principles-of-Investment-Complete-Course-ASHFORD-1398.htm?categoryId=-1 If You Face Any Problem E- Mail Us At Contact.Hwnerd@Gmail.Com Week 1 Assignment Annualized Returns Chapter 3 problem 18 Complete problem 18 in Chapter 3 (shown below) and submit to the instructor. Show your work to find the annualized return for each of the listed share prices. Write a 100 word analysis of the process to calculate these annualized returns. Suppose you have $28,000 to invest. You’re considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $40 per share. You also notice that a call option with a $40 strike price and six months to maturity is available. The premium is $4.00. MMEE pays no dividends. What is your annualized return from these two investments if, in six months, MMEE is selling for $48 per share? What about $36 per share? Week 1 DQ1 Blume’s Formula, Allocation, and Selection From Chapter 1, answer Concept Question 5: What is Blume’s formula? When would you want to use it in practice? Also, from Chapter 2, answer Concept Question 4: What is the difference between asset allocation and security selection? Remember to complete all parts of the questions and support your answers with examples from the text and other resources. Week 1 DQ2 Money Market Funds From...
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