Reading 42: Fixed Income securities: Defining elements
1) Basic features of a fixed income security (Los 42.a)
a) Issuers of Bonds
Corporations.
o Financial companies
o nonfinancial companies.
Sovereign national governments. (trái phiếu CP)
Nonsovereign governments. (Trái phiếu chính quyền địa phương Municipal bonds)
Quasi-government entities. (trái phiếu của các tổ chức KT – TC liên kết với CP)
Supranational entities Issued by organizations that operate globally such as
o World Bank,
o European Investment Bank,
o International Monetary Fund (IMF).
b) Bond maturity
Maturity date of a bond is the date on which the principal is to be repaid.
Once a bond has been issued, the time remaining until maturity is referred to as Term to maturity
or Tenor of a bond.
Perpetual bonds Bonds that have no maturity date
Money market securities Bonds with original maturities of one year or less
Capital market securities Bonds with original maturities of more than one year
c) Par value
The par value/ face value/ maturity value/ redemption value/ principal value of a bond of a bond is
the principal amount that will be repaid at maturity.
P > F the bond is trading at a premium to par
P < F the bond is trading at a discount to par
P = F the bond is trading at par
d) Coupon payment
Coupon rate on a bond is the annual percentage of its par value that will be paid to bondholders.
Plain vanilla bond/ Conventional bond A bond with a fixed coupon rate
Zero-coupon bond/ Pure discount bond A bond paying no interest prior to maturity
Pure discount refers to the fact that these bonds are sold at a discount to their par value and the interest is
all paid at maturity when bondholders receive the par value.
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