Probir Banerjee has Published 469 Answers

What are the pitfalls of the Price Earnings Ratio (P/E Ratio)?

Probir Banerjee

Probir Banerjee

Updated on 17-Sep-2021 08:44:34

Not Cash EarningsThe biggest and, by far, the most prominent disadvantage of the P/E ratio is that the earnings it shows are the accounting earnings. These earnings are defined by the accounting standards of specific standards for a particular country. The earnings are not the cash earnings of the firm. ... Read More

What is Standard Deviation of Return?

Probir Banerjee

Probir Banerjee

Updated on 17-Sep-2021 08:42:48

Standard Deviation (SD) is a technique of statistics that represents the risk or volatility in investment. It gives a fair picture of the fund's return. It tells how much data can deviate from the historical mean return of the investment.The higher the Standard Deviation, the higher will be the ups ... Read More

What is meant by Default Risk and Default Premium?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 12:25:41

What is Default Risk?Both corporate and governments issue bonds for the investors, but there is a clear difference between them. Government bonds are free from the chances of default. That is, it is believed that government bonds will never fail to pay the interest rates and the principal as and ... Read More

How are redeemable and non-redeemable preference shares valued?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 12:24:57

It's known to us that redeemable shares can be bought back by the issuing company on a later date but irredeemable shares cannot be bought back by the issuer before the date of maturity. However, for internal operation and regulatory reasons, shares need to be valued. There are many methods ... Read More

What are the different types of Preference Shares?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 12:23:57

Companies may generally offer two types of shares − ordinary shares and preference shares. Preference shares have preference over ordinary shares in terms of payment of dividends and returning the capital in case the company wounds up. The capital offered by preference shares is known as share capital. Preference shares ... Read More

What are pure discount bonds?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 12:22:08

Unlike most other bonds, pure discount bonds do not carry an explicit interest rate. Instead, they offer a lump sum depending on the current face value of the bond on a future date. The difference between the purchase value and face value gives the YTM or return to the investor ... Read More

What is meant by the Duration of a Bond?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 12:19:54

The duration of a bond is its weighted average of times of cash flow. The calculation of duration provides importance to cash flows and their timing. The weight is calculated for the present value of cash flow to the bond value.Therefore, three types of calculations are involved in computing the ... Read More

What are Yield to Maturity, Yield to Call, and Current Yield?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 12:13:26

Yield to MaturityA bond's yield to maturity is the bond's overall rate of return, considering both incomes from interests and any capital loss or gain. YTM is the internal rate of return of the bond. It is assumed in the case of YTM that an investor will buy the bond ... Read More

What is a bond (debenture) and what are its features?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 12:11:47

A bond is a long-term debt instrument, such as security usually redeemable after a certain period of maturity. The bond is issued by a party, such as the government to raise money. All bonds are not the same in nature. Some bonds may not be redeemable all the time and ... Read More

What are the most important considerations in Credit Rating?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 12:10:05

Credit rating is a process to measure the default risk of bonds. There are credit rating agencies in every country that do this. The idea is to keep investors in safe water when it comes to investing. Credit rating agencies follow various methods to measure the ratings, including imminent market ... Read More

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