Scribd
Upload
356 views2 pages

Bond Creation Assignment (F.I.E.V)

The document discusses the creation of a new bond called the Multitudinous Bond. The bond allows for deferred interest payments, with accrued interest being paid at maturity instead of periodically. Bondholders can also optionally convert the bond into common stock after a minimum holding period. This provides flexibility in interest payments for the issuer and equity-like returns for investors. However, it also carries risks like liquidity risk and high costs for the issuer if interest rates rise significantly. The bond is proposed to be created by students Akshay Surana, Jasmeet Singh, Shubham Chhajer, and Priya Harlalka.

Uploaded by

JASMEET SINGH
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
356 views2 pages

Bond Creation Assignment (F.I.E.V)

The document discusses the creation of a new bond called the Multitudinous Bond. The bond allows for deferred interest payments, with accrued interest being paid at maturity instead of periodically. Bondholders can also optionally convert the bond into common stock after a minimum holding period. This provides flexibility in interest payments for the issuer and equity-like returns for investors. However, it also carries risks like liquidity risk and high costs for the issuer if interest rates rise significantly. The bond is proposed to be created by students Akshay Surana, Jasmeet Singh, Shubham Chhajer, and Priya Harlalka.

Uploaded by

JASMEET SINGH
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Bond Creation Assignment

(F.I.E.V)

What is Bond?
A bond is a fixed income tool that constitutes a loan to a borrower (usually corporate or
governmental) from an investor. A bond that includes the details of the loan and its payments
could be considered as an I.O.U. between the lender and the borrower. Bonds are used for
financing projects and activities by businesses, municipalities, states and sovereign
governments. Bond owners are the issuer's debtors or creditors. Bond details include the end
date when the principal of the loan is due to be paid to the bond owner and generally include
the conditions of the borrower's variable or fixed interest payments.
Further explained in points:

 Bonds are units of corporate debt issued by companies and securitized as tradeable
assets.
 A bond is referred to as a fixed income instrument since bonds traditionally paid a fixed
interest rate (coupon) to debtholders. Variable or floating interest rates are also now
quite common.
 Bond prices are inversely correlated with interest rates: when rates go up, bond prices
fall and vice-versa.
 Bonds have maturity dates at which point the principal amount must be paid back in
full or risk default.

“To Construct one such new Bond”

 Bond Name: Multitudinous Bond

To create some reserves of cash in initial days a bond with a feature of deferred payment
is created wherein interest will not be paid periodically but as the bond matures accrued
Interest will be paid at one go.
From then the bond holder will have to keep the bond for some minimum period after
which the bond-holder will be given an option to convert his bond into shares of
common stock, at an agreed upon price, conversion ratio, conversion rate, etc being rate
floor pre-determined.
Adding this feature there may arise a situation of Forced Conversion and Capital
appreciation of a bond-holder, to solve this issue there will be a callable option as well
in the bond which issuer can take at those particular time of Forced conversion and to
balance it of the investors would be provided high coupon rates.
 Advantages
 Savings in the form of Interest for initial days
 Alternate use of interest savings
 Flexibility in making interest payments
 High coupon rates to investors
 Asset protection for Investors
 High Equity like return

 Disadvantages
 Cannot take advantage when rates would be very high
 Cost of company high as rates are high
 Liquidity Risk
 Capital appreciation of bondholder

Submitted By: (Group 5)

Akshay Surana (18PGDM002)

Jasmeet Singh (18PGDM022)

Shubham Chhajer (18PGDM046)

Priya Harlalka (18PGDM084)

You might also like