CHAPTER 1 Flashcards
What are T bills used for?
To manage a government’s cashflow.
What is the minimum amount of investment for T bills?
£500,000
US Bonds…
T notes = 1-10 yrs
T bonds = 10+ yrs
German Bonds…
Schatz = 2 yrs
Bobls = 3-5 yrs
Bearer Bunds = 10-30 yrs
French Bonds
BTFs = up to 1 year
OATS = 2-50 yrs
Japanese Government Bonds..
Japanese Government Bonds = 20 yrs
T Bill maturities…
UK: 1,3,6,12 months
US: 1,2,3,6,12 months
What are the two type of corporate bonds?
Debentures and Convertibles
What are debenture and convertible bonds?
Debenture - backed by security if the issuer goes into liquidation. Rate of interest is less.
Convertible bonds - bonds converted into other types of bonds or equities.
What are Permanent Interest Bearing Shares?
- Type of corporate bonds issued by building societies.
- For investors who seek income.
- Higher return but higher risk.
- Interest is paid gross and half yearly and is taxable.
- Building societies have no obligation to pay the interest in any one year, nor to roll it over.
- Only repaid on liquidation and are the last creditors to be repaid.
What are convertible loan stocks?
Behave liike ordinary loan stocks but can be converted into shared.
Why are convertible loan stocks issued by companies?
- Attractive to investors as they combine certainty of predictable income streams of a loan stock with the potential for growth that shares offer.
- Better chance of raising capital due to its attractiveness.
- Companies tax liability is calculated after the deduction of interest.
What are contingent convertibles (CoCos)?
Corporate bonds. Debt instrument issued to convert equity, contingent on a specified event occuring.
What is the yield and risk on contingent convertibles?
Higher risk, higher yield.
What are supranational bonds?
Corporate bonds. Entities formed by multiple countries to promote economic development of their members and make collective decisions on issues that will affect each country’s citizens.
