Probir Banerjee has Published 469 Answers

How is the volatility of a bond measured?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 12:07:56

The volatility of a bond price arises from the fluctuation of the interest rates. The volatility of a bond is given by duration and its yield to maturity (YTM). The formula for volatility is given below$$ Volatility = \frac{Duration}{1 + YTM}$$Price VolatilityPrice volatility is represented by percentage bond price change ... Read More

What is the difference between Liquidation Value and Going Concern Value?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 12:06:22

A business may need to know the value of its assets in certain conditions, such as when the business is sold or the assets are replaced. In such circumstances, liquidation and going concern value helps to determine the value of the business. There are differences between liquidation and going concern ... Read More

Rating of Bonds - Investment Grade, Speculative, and Junk Bonds

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 12:02:10

We know that credit rating agencies segment the bonds according to their creditworthiness of the bonds. The credit rating is often represented via letters. In the process, the rating agencies offer different representing designations to make it easier for investors to understand the creditworthiness of the bonds.Here is the list ... Read More

What is the difference between Market Value and Present Value?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 11:59:44

Market Value is the current value of a share or security in the market. It shows the price of a share at which it is sold and bought in the stock markets. Market value per share is considered to be higher than book value per share. Market value per share ... Read More

Yield Curve and Inverted Yield Curve

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 11:58:19

The yield curve shows the relationship between the maturities of bonds and their yields to maturity. In the normal case, short-term bonds yield less than long-term bonds, and the yield curve is upward sloping. Investors have to be content with lower returns when they invest for the short term. In ... Read More

What is a Redeemable Bond?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 11:56:47

The redeemable bond is a bond with the security of payment after a certain period of time known as maturity. These bonds largely fall in the category of redeemable debt. Issuers of redeemable debt issue them for long-term financing. The interest rates and the principal are usually paid back on ... Read More

What is Interest Rate Risk?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 11:55:06

The interest rates of bonds keep changing in the market and this exposes investors to a risk known as interest rate risks. The interest rate risk is the risk arising due to the fluctuation of interest rates. It is pretty common in the markets and investors to keep a close ... Read More

How is a bond with maturity valued?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 11:52:34

There are basically three types of bonds in the market −Bonds with maturityPurely discount bondsPerpetual bonds.In this article, we will see how the bonds with maturity are valued. Bonds with maturity have a maturity date on which the bond's value with the interest payment is returned to the investor.Note − ... Read More

What is a Perpetual Bond?

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 11:51:43

A perpetual bond is a never-ending bond. They also don't have a maturity value. these bonds just pay the interests in the form of coupons for an indefinite period. Since the interest is paid for theoretically forever, the bond is named perpetual meaning forever.ConsiderationsA perpetual bond is an obligation. It ... Read More

Expectation Theory, Liquidity Premium Theory, and Segmented Market Theory

Probir Banerjee

Probir Banerjee

Updated on 18-Aug-2021 11:44:26

Expectation TheoryThe upward sloping curve or the inverted curve is supported by the Expectation Theory. It states that since investors want the maximum return from their short-term investments, the rate of the short term should increase in the future. Then, we must assume that long-term rates are higher than short-term ... Read More

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