asset valuation debt investments basic concepts

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1、十四AssetValuation:DebtInvestments:BasicConcepts1.A:FeaturesofFixedIncomeSecuritiesa:Describethebasicfeaturesofabond(maturity,couponrate,parvalue,provisionsforpayingoffbonds,currencydenomination,andoptionsgrantedtoissuerorinvestor).Maturity:thetermtomaturity(ors

2、imply"maturity")isthelengthoftimeuntiltheloancontractoragreementexpires.Borrowersarecommittedtomeettheirobligationsoverthisperiod.Couponrate:thecouponrateistheratethatwhenmultipliedwiththeparvalueofabondgivestheamountofinteresttobepaidbytheborrowereveryperiod.

3、Theparvalueofabondistheamountthattheborrowerpromisestopaybeforetheendofthetermtomaturity.Bondscanbepaidoffinavarietyofforms:·Bulletmaturitybondspaytheentireprincipalinonelumpsumamountatthematuritydate.·Serialbondspaytheprincipalatdifferentintervals.Bondsareiss

4、uedinserieswithaseparatepaymentdatespecifiedforeachseries.Amortizingsecuritiesmakeperiodicprincipalandinterestpayments.Thefollowingembeddedoptionsaregrantedtoissuers:1.Therighttocalltheissue.2.Theacceleratedsinkingfundprovision.3.Inthecaseofamortizingsecuritie

5、s,theprepaymentrightgrantedtotheborrowersoftheunderlyingloans.4.Thecaponthefloatingcouponratethatlimitstheamountofinterestpayablebytheborrower/issuer.b:Identifyanddescribetherangeofcouponratestructures(zero-couponbonds,set-upnotes,deferredcouponbonds,andfloati

6、ng-ratesecurities).Zero-couponbonds:zero-couponbondsarebondsthatdonotpayinterest.Ifyouarewonderingwhyanyinvestorwouldbuysuchasecurity,theanswerliesinthefactthatsuchsecuritiesalwayssellbelowtheirparvaluepriortomaturity.Thedifference,F-P,betweentheirsellingprice

7、(P)andfacevalue(F)representstheimplicitinterestthatwouldbeearnedbytheinvestorifthebondweretobeheldtomaturity.Step-upnotes:step-upnoteshavecouponratesthatincreaseovertimeatapre-specifiedrate.Theincreasemaytakeplaceonceormoreduringthelifeofthebond.Forexample,abo

8、ndmaycarrya6percentcouponforthefirst3years,whichstepsupto6.25percentforthefollowingtwoyears,andmayincreaseagainto6.5percentintheeighthyear.Deferredcouponbonds:deferredcouponbondsma