Need to have the following blanks filled is: A______provision allows the bond is
ID: 2768983 • Letter: N
Question
Need to have the following blanks filled is:
A______provision allows the bond issuer to receive back the bond before maturity?
Point and figure charts with X/Os are used in Day to day price movements__.
The two filings that all public companies must make each year and each quarter are the_______ and __________.
The five determinates of an options value are ____, _____, _____, _____, ______.
Less required margin to buy a stock means more________ and _______ return on equity.
Stocks are valued by discounting all future _____________. As a relative measure of price sensitivity, or the change in the change of the price, only __________________ securities have this asymmetric characteristic.
Explanation / Answer
A call back provision allows the bond issuer to receive back the bond before maturity.
Explanation: Bonds are issued for taking loan. Very often this document contains a call back clause. By using this clause, company can repay the bond before its maturity at a price stated in the terms and conditions of bond. Suppose a bond of 10 years have been issued at 10% coupon rate. Subsequently it was observed after 4 years that average interest rate on such bond has reduced to 7%. Thus the existing bond is a vary costly to the firm. In order to reduce the interest burden company can use call back provision and repay it before maturity.
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Point and figure charts with X/Os are used in Day to day price movements of stock.
Explanation: It is used in technical analysis of stock price movement. It does not lik price movement With the passage of time. It is indicated by a series of X and 0 signs in a stacked manner. X indicates rise in price ad 0 indicates fall in price.
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The two filings that all public companies must make each year and each quarter are the form 10K and form 10Q
Explanation: 10K form is like anual reports of the company sent to stock holders. It contains informations in details. It includes history of the company., Organization structure, Remmuerations of directors and executives, risk factors etc. Most significant one is the audited Annual report on Income statement and statement of assets and liabilities. It is submitted within 90 days of the end of the year.
Second statement is 10Q. It is to be filed within 45 days of the end of a quarter. It will contain performance achieved by the public company in the related quarter. It is submitted for first, second and third quarters. Fourth quarters information are already covered in 10-K
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Option is a derivative instrument. It gives the right to option buyer, to buy/sell its underlying assets at a pre-determined price within a specified future date. For purchasing this right, he has to pay some premium to its seller (kown as writer). This premium is known as option value. Black-schole method is used for option valuation. Five determinants of option valuation are-
1. Current spot price of underlying asset. If option is on stock X, then current spot price of stocvk X is the first variable.
2. Next determinant is the strike price of underlying asset as stated in the option. It is known as strike price of option. Right of buying or selling will be exercised at this price.
3. Next determinant is the movement of the stock price observed. It is known as volatility. It is variance value of stock price.
4.Next determinant is risk free interest rate. It is the rate offered on Government issued securities which has no default risk.
5. Last determinant is the time of stock option to mature.
Answer: The five determinates of an options value are Current spot price of underlying asset S), Strike price of Option (K),Risk free rate (r), Volatility of stock, and time of option (t) .
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Margin is required on stock to cover up the ucertaity in the price movement of stock. Less margin is needed if price is more or less stable. In that situation it is less risky. Also high return with less risk is the best combination to lower the margin.
Answer: Less required margin to buy a stock means more stability in market price and higher return on equity.
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Price/value of a stock is the sumof the present value of all future cash flows receivable in future by common stock holders.
Stocks are valued by discounting all future cash flows As a relative measure of price sensitivity, or the change in the change of the price, only common stock securities have this asymmetric characteristic. For other securities cash flows are determiable with certainty. But for common stock it is very difficult to estimate expected cash flows as they are paid on the basis of residual income.
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