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Trade Discount (Definition, Example) | Trade vs Cash Discount
What is a Trade Discount? Trade discount refers to the reduction in list price known as discount, allowed by a supplier to the consumer while selling the product generally in bulk quantities to the concerned consumer to increase the sales of the business as more customers are attracted when the discount is given on the list price of the product.
Bullet Bond (Definition, Example)| How Does Bullet Bonds Work?
The US government decided to issue a dollar-denominated bullet bond that carries a fixed coupon interest payment of 3.5% payable semi-annually maturing after 5 years with a principal face value of $1000 on 1 st January 2018. The bonds mature on 31 st Dec 2022. The current yield on such bonds is 3%.
Discount Factor (Meaning, Formula) | How to Calculate?
Calculation (Step by Step) It can be calculated by using the following steps: Step 1: Firstly, figure out the discount rate for a similar kind of investment based on market information. The discount rate is the annualized rate of interest and it is denoted by â€˜iâ€™.
Bond Pricing Formula | How to Calculate Bond Price? | Examples
Since the coupon rate is lower than the YTM, the bond price is less than the face value and as such the bond is said to be traded at discount.. Example #2. Let us take an example of a bond with semi-annual coupon payments. Let us assume a company ABC Ltd has issued a bond having the face value of $100,000 carrying a coupon rate of 8% to be paid semi-annually and maturing in 5 years.
Accounting for Derivatives (Definition, Example) | Step by
Accounting for Derivative Instruments. Accounting for derivatives is a balance sheet item in which the derivatives held by a company are shown in the financial statement in a method approved either by GAAP or IAAB or both.. Under current international accounting standards and Ind AS 109, an entity is required to measure derivative instruments at fair value or mark to market.
What are Bonds? | Types of Bonds | Pricing, Risks, Indices
Fixed-rate bonds have coupons remaining constant throughout the life of the bond.; Floating Rate Notes are those having the coupon linked to the reference rate of interest such as the LIBOR.Since these are volatile in nature, they are classified as Floating. For e.g. the interest rate may be defined as LIBOR + 0.25% and does get re-calculated on a periodical basis.
Collateralized Mortgage Obligation (CMO) | Top 5 Types of
Time Tranching â€“ All the principal payments available at one time are used to pay off the first tranche. Any next prepayments go to the next tranche in the sequence. This way, different tranches mature at different times. Parallel Tranching â€“ This occurs when the coupon rates of all tranches eventually equal the interest rates of the mortgages in the pool.
Convexity of a Bond | Formula | Duration | Calculation
Calculation of Convexity Example. For a Bond of Face Value USD1,000 with a semi-annual coupon of 8.0% and a yield of 10% and 6 years to maturity and a present price of 911.37, the duration is 4.82 years, the modified duration is 4.59 and the calculation for Convexity would be:
Ponzi Scheme - Definition, Examples & Explanation
Ponzi scheme is an act of fraud in which investment is made by a potential investors with high expected returns and minimum or no expected risk whereby returns are generated generally for early investors in order to attract new investors and the amount invested by new investors is used to pay off early investors. Explanation