Flat Price, Accrued Interest, and Full Price of a Bond
When investors purchase shares, they pay the quoted price. However, for bonds, there can be a difference between the quoted price and the price paid. Full Price When a bond is between coupon payment dates, the price has 2 components:…
Matrix Pricing
When fixed-rate bonds are not actively traded, or there is no market price to calculate the rate of return required by investors, it is common practice to estimate the market discount rate and price based on quoted or flat prices…
Measures for Fixed-Rate Bonds and Floating-Rate Notes
Yield Measures for Fixed-rate Bonds Fixed-rate bonds are those that pay the same amount of interest throughout their specified term. Measurement for fixed-rate bonds depends on the timing of the bond’s cash flows. The following are the measures of fixed-rate…
Spot Curve, Yield Curve on Coupon Bonds, Par Curve, and Forward Curve
Yields-to-maturity for zero-coupon government bonds could be analyzed for a full range of maturities called the government bond spot curve (or zero curve). Government spot rates are assumed to be risk-free. Spot Curve The spot curve is upward sloping and…
Voting Rights and Ownership Characteristics
In addition to issuing common or preference shares, companies can also issue different classes of these shares to further tailor the securities to the needs of the company and its investors. Common Shares Voting rights: Different classes of common shares…
Methods for Investing in Non-domestic Equity Securities
Along with the technological advancements in recent decades, it has become significantly easier for investors to make international investments at low costs. Similarly, international issuers are now more capable of raising money from foreign investors. This increase in global investment…
Strategic Analysis of an Industry
Determining which industries will earn economic profits (return on invested capital in excess of the cost of capital) is typically dependent on understanding the competitive environment within the industry. Thus, strategic analysis is the competitive environment analysis, emphasizing the implications…
Factors on Pricing Power and Price Competition
Barriers to Entry High barriers to entry generally entail more pricing power and less price competition, while low barriers to entry usually mean less pricing power and more price competition. Restaurants typically have low barriers to entry, and thus the…
Industry Life Cycle Models
An industry’s life-cycle position often has a large impact on its competitive dynamics, making this position an important component of the strategic analysis of an industry. Life-Cycle Stages Embryonic: an industry just beginning to develop, characterized by slow growth, high…
Characteristics of Representative Industries
A valuable comparison may include the following elements: major companies, barriers to entry, level of concentration, impact of industry capacity, industry stability, life-cycle, price competition, demographic influences, government & regulatory influences, social influences, technological influences, and business cycle sensitivity.
