100% tevredenheidsgarantie Direct beschikbaar na betaling Zowel online als in PDF Je zit nergens aan vast
logo-home
Investment management 324 - Summary $5.59
In winkelwagen

Samenvatting

Investment management 324 - Summary

16 beoordelingen
 22 keer verkocht
  • Vak
  • Instelling

A 100 page summary of all the work covered in Investment management 324 Includes a summarized formula sheet at the the end Includes examples from chapter 4, 7, and 8 at the end with detailed solutions

Voorbeeld 5 van de 100  pagina's

  • 30 augustus 2018
  • 100
  • 2018/2019
  • Samenvatting

16  beoordelingen

review-writer-avatar

Door: chelseaheath • 1 jaar geleden

review-writer-avatar

Door: janlouislock • 5 jaar geleden

review-writer-avatar

Door: 20796757 • 5 jaar geleden

review-writer-avatar

Door: sebastiaanr22 • 6 jaar geleden

review-writer-avatar

Door: 19930437 • 6 jaar geleden

review-writer-avatar

Door: sinclairduckitt • 7 jaar geleden

Covers everything needed to succeed in this module, including formula summaries and examples.

review-writer-avatar

Door: nicholasleroux • 7 jaar geleden

Bekijk meer beoordelingen  
avatar-seller
Investment management 324
Chapter 1:
Bonds: Overview of characteristics
Bonds can be issued by:
- Supranational organisations  World Bank
- Sovereign governments  Any country
- Non-sovereign governments  Local government (E.g. Western Cape)
- Quasi-government entities  Agencies owned by government (E.g. Post office)
- Companies
There is an important distinction between investment grade and non-investment grade
bonds (Risk and return)
Maturity
Less than 1 year: Money market
More than 1 year: Capital market
∞ years: Perpetual bond (Scarce)
Par value
- The amount that the issuer agrees to repay on the maturity date
- Also known as: Principle amount, principle value, par value, par, face value, nominal
value, redemption value, maturity value
- The USA quotes price as a percentage of par value
- South Africa quotes price as the Yield to maturity
Coupon payments
𝑪𝒐𝒖𝒑𝒐𝒏 = 𝐶𝑜𝑢𝑝𝑜𝑛 𝑟𝑎𝑡𝑒 × 𝑓𝑎𝑐𝑒 𝑣𝑎𝑙𝑢𝑒
- Annual payments in Europe
- Semi-annual payments in USE, UK, and SA (rest of world)
- Quarterly payments mostly companies
- Monthly payments = mortgaged backed securities
Plain vanilla bond: Fixed rate of interest
Floating rate notes: Pay a reference rate plus spread
- The spread is normally quoted in basis points (1 bps = 0.01%)
Zero coupon bond: Pay no coupons (Also called pure discount bonds)
- Are issued at a discount and are redeemed at par
- Sometimes called pure discount bonds

,Reference rates
Libor (London interbank offered rate) is widely used
- Euribor = Euro bank
- Hibor = Hong Kong
- Sibor = Singapore
- Jibar = SA
Jibar:
- The Johannesburg interbank agreed rate is the money market rate in SA
- It is calculated as the average interest rate at which banks buy and sell money
- This rate is calculated daily by the SA futures exchange as the average price lending
rate quoted independently by a number of different banks
- The rate is available in one-month, three-month, six-month, and twelve-month
discount terms
- The three-month rate is used as a benchmark of short-term interest rate movements
Duel currency bonds: Make coupon payments in one currency and pay the principle in
another
Currency option bonds: Gives bondholders the option to choose the currency in which they
want to receive payments (For each payment)
Yield measures
𝐶𝑜𝑢𝑝𝑜𝑛
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑖𝑒𝑙𝑑 = 𝑃𝑟𝑖𝑐𝑒

𝑌𝑖𝑒𝑙𝑑 𝑡𝑜 𝑚𝑎𝑡𝑢𝑟𝑖𝑡𝑦 = 𝐼𝑅𝑅 𝑜𝑓 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤𝑠
Legal, regulatory, and tax considerations (pg. 10)
Bond indenture
- Also called the trust deed (Legal contract)
- It specifies the features of the bond, the issuer, collateral (assets or guarantees)
credit enhancements, and covenants (Rights of bondholders, actions the issuer is
obligated to perform or prohibited from performing)
- The trustee verifies
Sources of repayment proceeds
Sovereign bonds: Taxes, ability to print money
Non-sovereign bonds: Government debt; general tax base, specific project, specific taxes
Corporate bonds: Operational cash flow
Securitisations: Cash flows from specific assets

,Collateral
- Secured bonds are backed by assets or financial guarantees
- Unsecured bonds have no collateral; bond holders have only a general claim
to the issuer’s assets
- Unsecured bonds are paid after secured bonds (Secured have lower credit risk)
- Debentures are a type of bond that can be secured or unsecured (Depends on jurisdiction),
but are generally unsecured
- Mortgage backed securities (MBS) are debt obligations that represent claims to the
cash flows from pools of mortgage loans (Special purpose vehicle)
- Covered bonds are debt obligations backed by a segregated pool of assets called a
“cover pool”
- Credit enhancement refers to a variety of provisions that can be used to reduce the
credit risk of a bond issue
- They offer additional collateral, insurance, or a third party guarantee that the
issuer will meet its obligations
- Can be from internal or external sources
Covenants
- Bond covenants are legally enforceable rules that borrowers and lenders agree on at
the time of issue
- Affirmative covenants specify things the issuer must do
- Usually administrative, pay interest, pay taxes, report
- Negative covenants specify things the issuer may not do
- Usually to restrict actions that increase risk, such as borrowing more money,
paying dividends, selling assets, new investments, mergers and acquisitions
Global bond markets




Domestic bond market:
- Domestic issuer
- Local currency
- Locally traded
- Local rules (Jurisdiction)

,Foreign bond market:
- Foreign issuer
- E.g. Yankee bond, Samurai bond, Kangaroo bond
External bond market (Eurobond market):
- 1960s: Restrictive regulations in the USA bond market
- Eurobond market underwritten by a syndicate of institutions from different
jurisdictions
- “Euro” refers to “External”, not to the currency
- E.g. Eurodollar, Euroyen  Euro denominated Eurobond
- Less regulated, bearer bonds, not registered by trustee
- Bearer bonds have no specific owners (I.e. whoever ‘bears’ the bond owns it)
- Not issued to investors in the USA, mostly investors from Europe, Middle East, and
Asia Pacific
Tax:
- Usually coupons taxed as income, changes in value as capital gains (when sold)
- Some bonds are tax free (E.g. municipal bonds in the USA)
- Bonds at a discount: Some portion of the discount is included in income every year
(USA)
Structure of a bond’s cash flow (pg. 23)
Principle repayment
Normal pattern (Bullet bond):
- Periodic coupons
- Entire payment of principle occurs at maturity

, Fully amortised bond:
- Even cash flows throughout




Partially amortised bond:
- Higher coupons than normal, but less than amortised
- End capital repayment is reduced (Balloon payment)




Sinking fund provision
- Plan to set aside funds to retire the bond
- Originally, a sinking fund was a separate cash reserve
- Now, either:
- Retire a set percentage of the bonds each year (Lottery)
- Reduce the principle annually according to a set schedule

Voordelen van het kopen van samenvattingen bij Stuvia op een rij:

Verzekerd van kwaliteit door reviews

Verzekerd van kwaliteit door reviews

Stuvia-klanten hebben meer dan 700.000 samenvattingen beoordeeld. Zo weet je zeker dat je de beste documenten koopt!

Snel en makkelijk kopen

Snel en makkelijk kopen

Je betaalt supersnel en eenmalig met iDeal, creditcard of Stuvia-tegoed voor de samenvatting. Zonder lidmaatschap.

Focus op de essentie

Focus op de essentie

Samenvattingen worden geschreven voor en door anderen. Daarom zijn de samenvattingen altijd betrouwbaar en actueel. Zo kom je snel tot de kern!

Veelgestelde vragen

Wat krijg ik als ik dit document koop?

Je krijgt een PDF, die direct beschikbaar is na je aankoop. Het gekochte document is altijd, overal en oneindig toegankelijk via je profiel.

Tevredenheidsgarantie: hoe werkt dat?

Onze tevredenheidsgarantie zorgt ervoor dat je altijd een studiedocument vindt dat goed bij je past. Je vult een formulier in en onze klantenservice regelt de rest.

Van wie koop ik deze samenvatting?

Stuvia is een marktplaats, je koop dit document dus niet van ons, maar van verkoper danielshacksnovis. Stuvia faciliteert de betaling aan de verkoper.

Zit ik meteen vast aan een abonnement?

Nee, je koopt alleen deze samenvatting voor $5.59. Je zit daarna nergens aan vast.

Is Stuvia te vertrouwen?

4,6 sterren op Google & Trustpilot (+1000 reviews)

Afgelopen 30 dagen zijn er 73356 samenvattingen verkocht

Opgericht in 2010, al 15 jaar dé plek om samenvattingen te kopen

Begin nu gratis

Laatst bekeken door jou


$5.59  22x  verkocht
  • (16)
In winkelwagen
Toegevoegd