The value of fixed-income securities: What does it means for the issuer and the
ID: 2617486 • Letter: T
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The value of fixed-income securities: What does it means for the issuer and the investor? One of the most important asset classes for investors are fixed-income securities that consist of debt obligations, or bonds, and preferred stock. In simple terms, a fixed-income security is a financial obligation in which the borrower agrees to pay specified sum of money at specified dates. This transaction involves different groups that comprise the bond markets: issuers, underwriters, and purchasers The entity issuing the debt obligation is the borrower in the transaction. Some of the biggest issuers in the bond market are (1) as the U.S. government and the government of U.K. (2) government-related agencies, such as Fannie Mae and Freddie Mac; (2) , such Fee , such as the state of Issuer Underwriter Purchaser California, Sakai City, Japan; (3) ,such as British Telecom, and The Walt Disney Co. and (4) such as the European Investment Bank and the World Bank.Explanation / Answer
1. Governments
2. Muncipal governments such as state of california
3. Corporates such as British Telecom
4. Financial Institutions like world bank
Check all that apply
(3) Because of covenants issuers find direct borrowing from a bank more restrictive and
(4) When US treasury yields are low and the spreads are narrow, issuers can lock in low costs of borrowing
Prices rise and yields fall. All else being equal, this leads to of corporate bond yields becuase they are riskier and their yields are higher than US treasury yields. A coportae bond with a narrow yield spread and a high credit rating will offer a relatively lower return when the bond is purchased. However, if the yield spread widens, the price of the bond will rise, thus improving/increasing the value of the fixed income asset class
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