Investment Appraisal Techniques | Payback, ARR, NPV, IRR, PI
Investment Appraisal Techniques. Investment appraisal techniques are payback period, internal rate of return, net present value, accounting rate of return, and profitability index.They are primarily meant to appraise the performance of a new project. The first question that comes to our mind before beginning any new project is “Whether it is viable or profitable?
Actived: Saturday Nov 28, 2020
Inverse Floaters | Coupon Formula, Calculation & Example
Similarly, as reference rates fall, the coupon rate increases because less is taken off. In the above example, notice that if 3-month Treasury bill rate exceeds 10%, then the coupon formula would produce a negative coupon rate. To prevent this there is a floor imposed on coupon rate, i.e. coupon rate cannot fall below its floor rate.
Types of Debentures | Basis - Redemption, Convertibility
The debenture classification is based on their tenure, redemption, mode of redemption, convertibility, security, transferability, type of interest rate, coupon rate, etc. Ultimately, a debenture is not like a standard product configured strictly. It is an agreement to be agreed between the corporation and the debenture holders that decides the characteristics of a debenture.
All the 21 Types of Bonds | General Features and Valuation
The coupon payments on the bond usually have a payment frequency. The coupons are usually paid annually or semi-annually; however, they may be paid quarterly or monthly as well. Yield. The effective return that the investor makes on the bond is called a return. Assuming a bond was issued for a face value of $ 1000 and a coupon rate of 10% on
Foreign Currency Convertible Bond (FCCB)
The coupons on the bond can be zero coupons or usually lower coupons, also, the bonds can be issued at a premium or discount depending on the coupon provided. Given these flexibility and cost saving attributes the volumes on the issuance of foreign currency convertible bonds have gone up considerably with more and more investors trying to get
Duration of a Bond | Portfolio Duration | Macaulay
The unit of bond duration is expressed in years. Also, the price of the bond and the interest rates are inversely related. Therefore, if a bond has a duration of 5 years, it signifies that fo 1 r every 1% increase in the interest rate, the price of the bond will fall by 5% and vice-a-versa. The greater is the bond duration, the greater will be the amplification in the movement of bond price
Perpetual Bonds | Define, Advantages, Disadvantages
The biggest disadvantage of these bonds is that the issuer has no choice but to keep the money with it and pay interest forever whether it needs it or not.; The interest rate scenario changes with time. For all other sorts of funds, an issuer would prefer to repay in declining interest rate scenario and acquire fresh funds at lower rates and vice versa.
Puttable Bonds | Definition, Duration, Example, Advantages
Puttable Bond is a low yield source of finance. Companies obtain funds using different financial instruments. The cost for obtaining these funds sometimes put pressure on the company if the business is not doing well or during the off-season. But there are different financial instruments that offer a low coupon rate. The company can issue these
Senior Debt – Features, Importance, Advantages And More
It carries a lesser risk for the bank as it is secure and is paid off first in the case of bankruptcy. Senior lenders also enjoy an advantage in negotiations, like with junior lenders. Senior lenders can dictate terms of the agreement, like how much should the borrower repay to the junior lenders, and more.