Current yield vs yield to maturity

July 7, 2024 No Comments

A: Both the current yield and yield to maturity (YTM) formulas are methods of calculating the yield of a bond. However, these two methods of calculation have different applications depending on the goals of the investor. Bond Basics When a bond is issued, the issuing

Do convertible bonds have voting rights?

July 7, 2024 No Comments

A: Convertible bonds usually have no voting rights until they are converted. Even after conversion, they may not be granted voting rights. A convertible bond is a form of debt that features an embedded stock option allowing the convertible bondholder to convert his/her bond into

Do high interest rates hurt the performance of telecommunication stocks? If so, why?

July 7, 2024 No Comments

A: Conventional investing wisdom holds that certain types of equities have above-average sensitivity to rising interest rates, not unlike bonds. The common shares of utility companies, established oil companies and telecommunications companies (among others) become more bearish when talk of rate increases begins and investors

Do Preferred Shares Offer Companies a Tax Advantage?

July 7, 2024 No Comments

A: A preferred stock is a class of ownership in a corporation that provides a higher claim on its assets and earnings as compared to common stock. There is no direct tax advantage to the issuing of preferred shares when compared to other forms of financing such

How Are Bonds Rated?

July 7, 2024 No Comments

A: A bond rating is a grade given to a bond by various rating services that indicates its credit quality. It takes into consideration a bond issuer’s financial strength or its ability to pay a bond’s principal and interest in a timely fashion. Moody’s, Standard and

A corporate bond I own has just been called by the issuer. How can a company legally take away my bond? How do these call provisions work?

July 7, 2024 No Comments

A: Bond issues can contain what is referred to as a call provision, which is a right afforded to the issuing company enabling it to refund the bondholder the par value of his/her bond (perhaps including a small call premium) at the company’s discretion. Any

How Are Convertible and Reverse Convertible Bonds Different?

July 7, 2024 No Comments

A: Convertible bonds give bondholders the right to convert their bonds into another form of debt or equity at a later date, at a predetermined price and for a set number of shares. Meanwhile, reverse convertible bonds give the issuer the right, but not the obligation,

Are Bid Prices of T-Bills Higher Than the Ask?

July 7, 2024 No Comments

A: Typically, the ask price of a security should be higher than the bid price. This can be attributed to the expected behavior that an investor will not sell a security (asking price) for lower than the price they are willing to pay for it (bidding price). How Bid/Ask

How Are Day-Count Conventions Used in Bond Markets?

July 7, 2024 No Comments

A: A day-count convention is a system used in the bond markets to determine the number of days between two coupon dates. This system is important to traders of various bonds because it affects how the accrued interest and present value of future coupons is

Who Are the Key Players in the Bond Market?

July 7, 2024 No Comments

A: The bond market is for participants that are involved in the issuance and trading of debt securities. It primarily includes government-issued and corporate debt securities, and can essentially be broken down into three main groups: issuers, underwriters and purchasers. Bond Issuers The issuers sell bonds or other debt instruments

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