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 of bonds that are segmented and named by CRISIL −AAA (Triple-A) – Highest Safety – High Investment GradeAA (Double-A) – High Safety – High Investment GradeA – Adequate Safety – Investment GradeBBB (Triple B) – Moderate safety – Investment GradeBB (Double B) – Inadequate Safety/Moderate Risk – Speculative GradeB – ... Read More

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 is given by the total market value of shares outstanding divided by the total number of shares.Market value shows varying fluctuations in the daily market conditions and hence the trend of the share for the longer term is analyzed to determine the share's average price. When capital markets are working ... Read More

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 the case of long-term bonds, the rate must be higher for the investors to achieve a greater ROI (Return on Investment).Why does the yield curve inversion occur?When the yields of short-term bonds return more than long-term bonds, then the yield curves get inverted. An inverted yield curve shows a looming ... Read More

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 maturity as pre-informed while selling the bond by the issuer.How Redeemable Debt Works?Redeemable debts work well for both issuers and buyers. While issuers get capital financing, the buyers get an increased interest on these bonds.Most redeemable debts come with a call option. To overcome the risk associated, the issuers call ... Read More

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 eye on these types of risks to calculate the value of their portfolio including bonds and equity shares.Bonds with longer maturity have a higher risk than a bond of shorter maturity. For example, in a case of a bond that gives 10% back annually for a par value of INR ... Read More

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 is an obligation only in name because the issuer doesn't have to pay the lump sum and only interests are paid forever.Sometimes, perpetual bonds are preferred instead of dividend stocks. However, the similarities between the two are extremely limited.Dividend interests are not mandatory to be paid. That is in the ... Read More

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 − There are three types of bonds depending on their characteristics, but the bond with a maturity is the most common among them.Bonds with MaturityGovernments usually offer bonds that have a given interest rate and a maturity period. The net present value of a bond is its period of cash flows ... Read More

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 ones. However, in present value terms, the return from long-term security is equal to the series of short-term securities.Since future values from investments are the same as that of long-term returns, investors will be indifferent in choosing between them. The Expectation Theory assumes that if Capital Markets are efficient, there ... Read More

As we know, there are generally two types of shares − general shares and preference shares. They also have certain differences and some similarities. While the preference shares have some distinct characteristics, it is easy to sort the differences between them.The following features are available with preference shareholding.Preference in ClaimsPreference shareholders have the preference in claims on the assets of a company prior to equity shareholders. The equity shareholders are the owners of the company. Therefore, the preference shareholders have an upper hand while making a claim on the company's dividends and assets before the owners who are ready to ... Read More

Book ValueIn finance, assets are considered at their historical cost rather than present value. Therefore, the price gets depreciated over the years. Sometimes, book value represents net cost minus the amortized value. The book value of debt is represented at its outstanding amount.The difference between book values of assets and liabilities is always equal to net worth or shareholders' funds. Net worth divided by the number of shares gives the value of book value per share. The book value considers cost rather than value. By value, it means the worth of an asset today in terms of its potential advantages ... Read More