Discuss different types and characteristics of debt instruments with specific reference of Bonds. Due to covid19 the equity market exhibits down move and hence he considers it a risky investment. down so he considers it is quite risky. Mr. Sikander looking to have stable income. Mr. Sikander is a retired person and just received Amount 40,000,000 on account of different funds. He is looking to buy Bonds. Mr. Saleem a friend of Sikander suggested him to buy MCB bonds. The bond has 25 years’ life and was issued 13 years ago. It pays 11.5 percent coupon rate with face value PKR 1050. Mr. Ahmed wants to make 14% profit from his investments. a. Should Mr. Sikander buy MCB bond if it is currently selling at 930? b. How many bonds can he buy if the bond is selling at calculated price? c. Write features of Zero-coupon bond and why do investors buy it when they offer nothing periodically?
Answers
Answer:
Am I
Explanation:
As Covid-19 disrupts the Indian economy and the markets, several second-order effects of the global pandemic lie in wait on the horizon. One of the most prominent among these is the risk of defaults. Little data on this has come out into the public domain yet, but the number of government-mandated restrictions on businesses have steadily increased over the past month, affecting their profits and debt servicing ability.
Debt funds, in general, are characterized by credit risk in varying degrees. It is the highest in funds that buy low-grade corporate bonds and the lowest in funds that buy only government securities. Though credit risk funds carry the highest degree of credit risk, other types of debt fund categories also have this risk. In return for taking on credit risk, debt funds get bonds with high yields. They also derive returns if their holdings get upgraded by credit rating agencies or the market prices them higher due to an improvement in their credit profiles.