Bonds represent long-term debt instruments. The issuer of a bond promises topay a stipulated payment (interest and principal) to the bond holder. Bond indenture is a contractbetween the issuer and the bond holder, which specifies the detail of the issue such as par valueof the bond, its coupon rate, maturity period, maturity date, call/put options etc.Internationally, a secured corporate debt instrument is called a corporate bond while anunsecured corporate debt instrument is called a corporate debenture. In India, corporate debtinstrument is referred as debentures although they are secured.Government bonds are issued by Central and State Governments. These bonds are called giltedged securities. There are different types of bond
Straight bonds, Zero coupon bonds, Floatingrate bonds, bonds with embedded options, commodity linked bonds etc. These are dealt in detailin the later units.
Money Market Instruments:
Debt instruments which have a maturity of less than one year at thetime of issue are called M.M Instruments. The important money market instruments are:
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Q2. This distribution of returns for share Y and the market portfolio M is given below Returns (%)Probability Y Z0.30 30 -100.40 20 200.30 0 30You are required to calculate the expected return of security Y and the market portfolio, thecovariance between the market portfolio and security Y and beta for the security.Hint:ERp= 17 ; Covariance PM = - 168.0 ; Beta= -0.636Q3. Briefly explain the Dow TheoryQ4. Explain the strategies for overcoming psychological biasesQ5. List the major types of investment risks.Q6. How are the factors identified for APT?