Fixed-Income Security

Fixed Income Security

Fixed Income Security

Fixed Income Security is a type of debt instrument in which the issuer is liable to pay fixed income with a fixed interest rate to the investor. At the time of the purchase of these securities, a rate of interest is fixed, to be provided to the investor at the time of maturity. Under this type of instrument, the return is generally low because the risk associated which fixed-income security is very less, and because of this the return is also comparatively low. Fixed Income Security is mainly issued by the government, companies, and corporations to manage their cash flow. (more…)
Bearer Bonds

Bearer Bonds

Bearer Bonds

Bearer Bonds are the type of debt instrument which were introduced in the late 1800s by the U.S. government, in order to fund the reconstruction during the post-Civil War era. These are bonds that are not registered with any owner. Rather, the owner is someone who "bears" or has ownership of a bond and the interest will be transfer to that individual's account. These instruments were issued by governments, companies, and corporations to meet their capital requirement in a short period of time. (more…)
Treasury Bills

Treasury Bills

Treasury Bills

Treasury Bills also known as T-Bills are government securities that are issued at zero-coupon rates or zero interest rates. T-Bills are short-term securities that have a maximum tenure of one year. They are issued at a discounted price but redeemed at face value. The longer the maturity the higher the interest received by the investor. These securities are issued by the government at a low price and short-term to fulfill the short-term requirements of the government. (more…)
Equity-Linked Note

Equity-Linked Note

Equity-Linked Note

What is Equity-Linked Note (ELN)? An Equity-linked Note is a structured debt instrument. It refers to an investment instrument that provides return linked to the performance of underlying equity instead of the fixed interest rate. The equity tied to an equity-linked note can be a single security, group of securities, or a broader market index. It differs from other debt instruments which provide fixed interest on fix schedule to the investors. (more…)
Corporate Bonds

Corporate Bonds

Corporate Bonds

Corporate bonds refer to the debt securities that are issued by private and public entities. They are issued to raise funds for a variety of purposes, such as continuing operations, Mergers, and acquisitions, or to grow their business. These debt instruments often have a maturity of at least 1 year. Debt is a better alternative since it will not directly impact the company's shareholders, so most organizations tend to issue debt instruments to raise funds for their operations. (more…)
Bond Pricing

Bond Pricing

Bond Pricing

An instrument of indebtedness of the bond issuer to the holders is known as a bond. An organization can raise capital in financial markets either by issuing shares or by issuing bonds. A bond is a debt instrument in which an investor borrows money from the issuer for a specified period of time. They are typically issued by corporations, municipalities, states/provinces, and countries to fund a wide range of projects and activities. It is the issuer generally who sets the price and yield of the bond so as to supply the amount it desires by selling bonds. The total return expected on the maturity of a bond is called Yield to Maturity. (more…)
Deep Discount Bond

What is Deep Discount Bond

Deep Discount Bond

A bond issued with a face value of $1500 which means the investor will be paid $1500 at maturity plus any interest. However, bonds can be sold before maturity which is bought by other investors in a secondary market. Bonds that are issued at a value lower than their face value can be termed as a Discount bond. Since bonds are a type of debt security, bondholders receive interest which is called coupons from the bond issuer either monthly, quarterly, semi-annually, or annually. For example, if a bond worth $500 is sold in the secondary market for $150 can be termed as a Discounted bond. (more…)
What are Yankee Bonds?

What are Yankee Bonds?

What are Yankee Bonds?

Yankee bonds are Foreign bonds that are denominated in US dollars. The reason for taking a Yankee bond is issuer needs to pay less interest as compared to other interests. Yankee bonds are sold in the U.S. and are valued in dollars ($). It is registered with the US Securities & Exchange Commission  (SEC). As Yankee bonds are intended to be purchased in the primary market from U.S. citizens, they have to comply with SEC regulations. It is usually issued by Foreign companies, Government utilities, or Banks. The issuer can raise a huge fund with the help of the Yankee bond. They are the US equivalent of “Eurobonds”. It is important to note that Yankee bonds are not as same as Eurobonds it is just similar to them. (more…)
Floating Rate Notes

What are Floating Rate Notes

Floating Rate Notes

Floating rate notes are also known as Floater. A Floater is a kind of a bond or a debt instrument which a variable coupon rate, which can also be term as "interest rate", which is decided on the basis of the benchmark rates such as the U.S. Treasury note rate and London Interbank Offered Rate (LIBOR), also known as Federal Reserve funds rate. The rate can be adjusted monthly or, quarterly on the basis of these benchmark rates. These instruments are issued by financial institutions, governments, and other corporate bodies. (more…)
Commercial Paper Market in India

Commercial Paper Market in India

Commercial Paper

Commercial paper is an unsecured, short period debt instrument issued by a company, usually for the finance and inventories, temporary liabilities, accounts payable, and meeting other short-term liabilities. Maturities on commercial paper are from seven days to 270 days but not longer than 270 days. Majorly Commercial papers are issued at a discount from its face value at the current market interest rate. These papers are like a promissory note allotted at a huge cost and exchangeable between the All-India Financial Institutions and Primary Dealers. Mainly various individuals, corporate, financial institutions, non-resident Indians, foreign institutional investors, and investors from various banking sectors purchase and trade this instrument. (more…)