Par value vs market value

July 7, 2024 No Comments

A: The valuation of financial instruments can be expressed a number of different ways. Two of the most important valuations are par value and market value. Par value, also called face value, refers to the stated value of the instrument at issuance. Market value, on

What are the differences between preference shares and bonds?

July 7, 2024 No Comments

A: Although holders of preference shares and bonds are both entitled to regular distribution payments, preference shares do not have a maturity date and can continue in perpetuity, unlike bonds. Bondholders are entitled to the receipt of regular interest rate payments, while holders of preference

Repo agreements versus vs. reverse repo agreements

July 7, 2024 No Comments

A: A repurchase agreement, or repo, is a form of collateralized lending, while a reverse repurchase agreement, or reverse repo, is a form of collateralized borrowing. The collateral is most commonly U.S. Treasury securities, but may include other government bonds, agency securities, mortgage-backed securities, corporate

What are the main advantages of fixed income securities?

July 7, 2024 No Comments

A: Fixed income securities are commonly used to diversify an investor’s portfolio, as they reduce the overall risk of an asset allocation or investment strategy weighted heavily in the stock market. Fixed income securities such as corporate bonds, government bonds, preferred company stocks and certificates

The difference between a bank guarantee and a bond

July 7, 2024 No Comments

A: A bank guarantee is a promise from a bank or lending institution that, if a borrower defaults on repayment of a loan, the bank will cover the loss. A bond is a debt instrument in which an investor loans money to a corporation or

The difference between fixed and current assets

July 7, 2024 No Comments

A: Fixed assets, also known as property, plant and equipment (PP&E), are tangible assets that a company expects to use for more than one accounting period. They are part of the non-current assets of an entity, and are different from cash and other current assets

The Differences Between a Collateralized Debt Obligation (CDO) and an Asset Backed Security (ABS)

July 7, 2024 No Comments

A: An asset-backed security (ABS) is a security created by pooling non-mortgage assets that is then resold to investors. A collateralized debt obligation (CDO) is a complex type of ABS that can be based on non-mortgage assets, mortgage assets or both together. Understanding the Differences

The interest rate used to define the “risk-free” rate of return is the

July 7, 2024 No Comments

A: a. discount rate. b. 90-day Treasury bill rate. c. five-year Treasury note rate. d. federal funds rate. Answers: b The 90-day Treasury bill rate is used because there is no credit risk, and the maturity is so short that there is no liquidity or

To what extent are utility stocks affected by changes in interest rates?

July 7, 2024 No Comments

A: Utility stocks are definitely subject to interest rate risk and can be significantly impacted by changes in interest rates. Competition With Bonds Utility firms can be adversely affected by rising interest rates in two ways. First, rising interest rates make investing in bonds more

Treasury Bond vs Treasury Note vs Treasury Bill

July 7, 2024 No Comments

A: The U.S. federal government offers three categories of fixed income securities to the buying public: Treasury bonds (T-bonds), Treasury notes (T-notes) and Treasury bills (T-bills). Each of these securities is issued with the full faith and credit of the U.S. government, and they are used

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