Indexed bonds borrowers link payments on bonds to

  • York University
  • FINE 2000
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  • alsdb17
  • 63
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- Indexed Bonds: borrowers link payments on bonds to price of a particular commodity; linking to a commodity that is integral to the firm will lower the bonds risk; commodity valued low, interest payments are less; commodity valued high, interest payments are larger - Asset-Backed Bonds: borrower sets aside a group of assets, income from these assets then used to service the debt - Securitizing: when financial assets are packaged and resold as asset-backed bonds; done through multi-seller or single-seller programs, offered by large investment dealers - Reverse Floaters: floating-rate bonds that pay a higher rate of interest when other interest rates fall, lower rate when other interest rates rise; riskier than normal bonds Convertible Securities - Warrant: investor right to buy shares from a company at a stipulated price before a set date; often packaged with bonds; most dramatic case of giving investors an option - Convertible Bond: holder may exchange for a specified amount of another security; valuable, sells at a higher price than other comparable bonds; converters to common shares hope share price will increase, generate large profits - Exercising Option: owners of convertible bonds do not pay cash when converting; exchange bond for the amount of the other security - Convertible Preferred Stock: investor with preferred stock has option to exchange for a specified amount of the firm's common stock

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