University School of Business

Bachelor of Business
Administration
Security Analysis and Portfolio Management
23BAT-241
Mr. Virender Thakur

Valuation of Bonds DISCOVER . LEARN .

EMPOWER
Valuation Of Securities
Course Objective

To develop understanding of different concepts

relating to analysis of investment and portfolio
management
Course Outcome
CO1
To understand different avenues of investment and to equip the knowledge of security
analysis.

CO2
To illustrate the concepts and theories of portfolio management for better investment. Source: https://www.digitalstudycenter.com/2015/05/security-valuati
on.html
CO3
To compare the investment alternatives and portfolio management theories.

CO4
To summarize the decisions for investment and comparison of portfolios for their results with
the predefined objectives

CO5
To adapt a model for portfolios using traditional concept or by using modern concept to get
more returns.

2
 Meaning of bond
Bonds are debt financial instruments that both public and private
sector companies use to raise funds for their operations. The
government agencies, financial institutions as well as private
enterprises issue these instruments to investors. Bonds are secured
by their physical assets. The holder of these bonds is the lender,
while the issuer of these bonds is the borrower. The borrower can
issue these bonds to the lender, only by promising to pay back the
loan at a specific maturity date with a fixed interest
rate. This interest rate is generally lower than debentures because
the physical assets of a company secure bonds whereas the
debentures are unsecured instruments.
 Meaning of Debenture
Debentures are also debt financial instruments like bonds.
Organizations use these instruments to get funding for their
daily needs. They are generally not secured by any
physical assets of the issuers, which makes them riskier
than bonds. They also carry a fixed or floating interest
rate. The debenture holders get first preference over
shareholders of a company when it comes to the payment
of interests/dividends. The interest rate on debentures is
generally higher than bonds because they are not
secured by the physical assets of a company.
 Types of bonds
(1) Callable Bonds: When a Bond issuer calls out
his right to redeem the Bond even before it
reaches its maturity, it is referred to as a Callable
Bond. This option is exercised by the Bond issuer.
An issuer can convert a high debt bond into a low
debt bond.
(2) Fixed-rate Bonds: Bonds whose coupon rate
remains the same through the course or tenure
of the investment, it is referred to as Fixed-rate
Bonds.
(3) Floating-rate Bonds: Bonds whose coupon rate
vary during the tenure of the investment, then it is
referred to as Floating-rate Bonds.
(4) Zero Coupon Bonds: Zero coupon bonds When the
coupon rate is Zero and the Bonds issuer pays only the
principal amount to the investor on maturity. It is called
as Zero-coupon Bonds.
(5) Puttable Bonds: These are those Bonds where an
investor sells their bond and get their money back
before the maturity date, then it is called as Puttable
Bonds.
 Types of debentures
Convertible debenture: These are a type of debentures
where the investors have the right to convert their
debenture holdings into equity shares of the company.
Generally, the rights of the debenture holders, the
conversion rate, and the trigger date for conversion are
defined at the time of issuing the debentures.
Non-convertible debenture: The debentures which do
not have the option to be converted into equity
shares are non-convertible debentures.
 Continue…..
Registered debenture: In the case of registered
debenture, the company that issues the debenture enters
the holding details, including the number of debentures
issued, name and address of the investor, in the register of
debentures.
Unregistered debenture: The unregistered debentures
are also commonly referred to as bearer debentures. In
these cases, the company does not maintain any records.
The company pays the principal amount and the interest
to the bearer of the instrument irrespective of whose
name is written on it.
 Continue…..
Redeemable debenture: These are a type of
debentures where the redemption date is
explicitly mentioned on the company's
debenture certificate.
Irredeemable debenture: Unlike the
redeemable debenture, which has a specific
redemption date, these debentures continue for
infinity, and there is no fixed date when the
company needs to pay the debenture holder.
 APPLICATIONS

It provides a basic knowledge of theories and

practices of investment management and security
analysis. It familiarizes with the concept such as
risk calculation and diversification in portfolio. It
helps to the know the different approaches to
security analysis namely fundamental analysis,
industry analysis and company analysis.

10
 References
 S.Kevin: Security Analysis and Portfolio Management,
PHI Learning.
 Punithavathy Pandian: Security Analysis and Portfolio
Management, Vikas House Publisher.
 Prasanna Chandra: Investment Analysis and Portfolio
Management, McGraw Hill Education
 Stephen Lofthouse, Jane Raybould: Investment
Management, John Wiley & Sons Publications.
 Amling Fredrick: Investment- An Introduction to
Analysis and Management, Prentice Hall India.
 Donald E. Fischer and Ronald J. Jordan: Security
Analysis and Portfolio Management, Pearson Education.
THANK YOU

For queries
Email: virender.usb@cumail.in