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VALUATION SECURITIES - Coggle Diagram

- - - - MATURITY
        
        maturities of 20 or 30 years
      - RISK AND RETURN
        
        Some bonds protect investors against inflation :
        
        an active secondary market for T-bonds, making the investments highly liquid
        
        Because treasury bonds are government-backed, they come at far lower risk than other investment vehicles.
      - bonds, notes, and bills
      - DEFINITION
        
        Issue through auctions, for large institutions
        
        Investment banks can repackage a Treasury bond cash flows
        into STRIPS
        
        Treasury STRIPS : Treasury strips are fixed income products similar to bonds but sold at a discount and mature at face value, much like zero coupon bonds with the difference that they are backed by the government and hence are virtually free from credit risk.
    - - DEFINITION
        
        under clearly defined terms
        
        has borrowed a certain amount of money and promises to repay it in the future
        
        a long-term debt instrument indicating that a corporation
        
        Placement: public or private
      - MATURITY
        
        maturities of 10 to
        30 years and with a par value
      - INTEREST RATES AND PRINCIPAL
        
        coupon interest rates
        
        represents the percentage of the bond’s par value that will be paid annually, typically in two equal semi annual payments
        
        The bondholder, who are the lenders, are promised the semi annual interest payments and, at maturity, repayment of the principal amount.
        
        Interest on bonds can be tax-deductible
        
        higher risk than government bonds
      - LEGAL ASPECTS OF CORPORATE BONDS
        
        Bond Indenture
        
        a legal document that specifies both the rights of the bondholder and the duties of the issuing corporation
        
        standard debt provisions
        
        specify certain record-keeping and general business practices that the bond issuer
        must follow.
        
        Restrictive Provisions/covenants
        
        place operating and financial constraints on the
        borrower.
        
        Sinking-Fund Requirements
        
        provide for the systematic retirement
        of bonds prior to their maturity
        
        Security Interest
        
        The bond indenture identifies any collateral pledged
        
        against the bond and specifies how it is to be maintained. The protection of bond
        
        collateral is crucial to guarantee the safety of a bond issue.
        
        Trustee
        
        a third party to a bond indenture.
        
        an individual, a
        corporation, or (most often) a commercial bank trust department
      - TYPES
        
        Zero-coupon bond
        
        an accrual bond, is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value
        
        Convertible bonds
        
        issued by companies that have high expectations for growth and less-than-stellar credit ratings
        
        The companies get access to money for expansion at a lower cost than they would have to pay for conventional bonds
        
        Investors, in turn, get the flexibility of turning their convertible bonds into cash or stock shares.
        
        Variable-rate bonds
        
        a type of municipal bond with a variable interest rate
        
        access short-term interest rates.
        
        fund a public project
  - - - A feature included in nearly all corporate bond issues that gives the issuer the opportunity to repurchase bonds at a stated
        call price prior to maturity
    - - Instruments that give their holders the right to purchase a certain number of shares of the issuer’s common stock at a specified price over a certain period of time.
    - - A feature of convertible bonds that allows bondholders to change each bond into a stated number of shares of common stock.