Equities and Bonds 1
- Created by: jesus christ
- Created on: 06-05-22 17:54
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- Equities
- Ordinary
- Common
- Every company has these
- Some are voting shares, some aren't (A or B, perhaps)
- Normally no dividend, unless very profitable
- Dividend will rise when profits are large. Preferred dividend is fixed
- Normally no dividend, unless very profitable
- Alphabet has three types: Class A with ONE vote, Class B with TEN votes, Class C has NO votes
- Can issue REDEMABLE shares, but only if normal ones are issued too
- Common
- Preference
- Preferred
- Some companies also issue these
- Pay a fixed dividend and non-voting. Can vote if dividend isn't paid
- Hybrid securities bc they resemble fixed income (dividend payment)
- Types
- Cumulative paid dividend before ordinary holders. AND given unpaid dividends before
- Participating: Can participate in higher dividend distributions
- Redeemable: Company can buy back at set cost in the future
- Convertible: Swap Preference for Ordinary
- Redeemable: Company can buy back at set cost in the future
- Participating: Can participate in higher dividend distributions
- Cumulative paid dividend before ordinary holders. AND given unpaid dividends before
- Preferred
- Ordinary
- Debt
- Yields
- Yield to Maturity / Gross Redemption Yield. Flat yield less capital gain/loss
- Net Redemption Yield
- Modified Duration
- Approx % change in the price of a bond brought about by a 1% change in interest rates
- MD x Bond Price. IR + 1% - so MD of 0.0102 - Bond Price of 95.84 = Price falls 1.00
- IR +0.5% - MD of 0.0102 - Price of 98.54 = 0.50
- Convertibles trade at a premium.
- Bond Price 110, option to convert 15 shares @ 6.40. 15 x 6.40 = 96. 110 / 96 = 14.58% premium.
- Conversion ratio - par / conversion price of the shares. 100 / $4.22 = 23.69 shares
- Bond Price 110, option to convert 15 shares @ 6.40. 15 x 6.40 = 96. 110 / 96 = 14.58% premium.
- Coupon x (days since last payment / Days between payments) = Accrued Interest
- Actual/Actual (ACT) 360 days. 30/360. ACT/365 normal with no leap years. ACTACT1 includes leap years. ACTACT2 year length is the number of days in the coupon period times number of coupons in year.
- Spreads are benchmarked against Government bonds and swap rates (exchanging floating rates for fixed rates)
- Yield curve inverts when the market anticipates interest rates will rise
- TIPS - US Treasury Inflation Protected Securities
- Discount rate or present value is the interest rate foregone. I.e. 100 today at 5% interest rate is is 100/1.05 = 95.23
- 1/(1+x)^x
- Untitled
- 1/(1+x)^x
- Yields
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