security market definition market are Briefly discussed in this section below. The securities market is important part of Macroeconomics.
The bond is quoted on the market at 950 rubles. On the bond, a coupon of 100 rubles is paid during the year. The current yield of the given bond is:
In addition, the bond market calculates the total yield, i.e. the return that an investor will receive if he holds the bond until the maturity date. Due to the fact that bonds on the market are quoted at a price that differs from the face value, and upon redemption of the bond, the investor receives the face value, the total yield differs from the current one.
In rare cases, the total profitability is determined by a simplified formula. In this case, the calculated profitability is approximate. The calculation of the estimated profitability is carried out according to the formula:
where H is the face value of the bond; P is the price of the bond; n is the number of years to maturity; Year is the annual amount of coupon payments.
Another security, without which it is impossible to imagine the normal functioning of the economy, is a bill.
A bill of exchange is a security that represents the obligation of one party to pay a certain amount of money to the other party upon reaching a certain date in the future.
The bill is:
1) a credit form of money and a means of payment;
2) a means of securing transactions and loans;
3) an accelerator of settlements between subjects of production and economic activities and banks;
4) a tool for planning and reallocating cash flows over time;
5) a tool for transferring money from one locality to another;
6) a tool for stitching non-payments.
The main characteristic features of a bill are:
• the unconditional nature of the monetary obligation; the obligation assumed by the drawer to pay a certain amount or an order to pay the bill of exchange to a third party cannot be limited by any conditions;
• the abstract nature of the obligation, i.e. references are not allowed in the text of the bill of exchange on the basis of which transaction it was issued;
• a strictly formalized procedure for filling out this document, i.e. the bill of exchange form must contain all the necessary details, since the absence of at least one of them makes the bill null and void;
• bills of exchange severity, which provides for a special procedure for collecting bills of exchange is much faster and easier than traditional methods of collecting debts;
• negotiability of a bill, which provides for the possibility of multiple transfer of a bill from one person to another by making a transfer note (endorsement), which makes it possible to use a bill as a means of payment instead of money;
• monetary form of settlement, ie. the subject of the obligation can only be cash.
Types of bills
In practice, the following types of bills are distinguished:
• Commodity (commercial) bill. This type of bill mediates a commercial transaction. With the help of a bill of exchange, the seller provides the buyer with a commercial credit, accepting from him in payment of the goods a bill of exchange payable within a certain period of time. A commercial bill has two main functions. Firstly, it is an unconditional promissory note, and secondly, it performs the function of a means of payment, since the owner of the bill of exchange can use it to pay with his suppliers for goods, works, services.
• Financial bill — this security is based on a financial transaction that is not associated with a commodity transaction. A financial bill mediates a financial transaction associated with obtaining a loan. A loan agreement is not drawn up between the lender and the borrower, and the borrower sells the bill of exchange to the investor, thereby attracting financial resources.
In Russia, bank bills have become widespread as a type of financial bills. With the help of these promissory notes, deposit operations of banks are drawn up. The bill certifies that the company has deposited the amount indicated in the bill to the bank, and the bank undertakes to repay this bill within a certain period with payment of interest income. In fact, the bill plays the role of a certificate of deposit .
• Friendly bill. These bills are issued to each other by persons for the same amount and for the same period. There is no real transaction behind the friendly bills. The purpose of issuing these promissory notes is to assist one of the participants in the circulation of promissory notes experiencing financial difficulties. Friendly bills carry a very high degree of risk.
• Bronze (blown) bill. This bill is issued for the purpose of committing fraudulent transactions. The Bronze Bill does not mediate a commercial transaction or a financial transaction. As a rule, at least one person involved in the circulation of bills is fictitious. The purpose of issuing a bronze bill of exchange is to obtain a loan from a bank secured by a bill of exchange or to pay off a bill of exchange for commodity transactions or financial obligations.
In Russia, the issue of friendly and bronze bills is prohibited. All issued bills are divided into two large groups: simple and transferable.
A promissory note (solo promissory note) is an unconditional promissory note of the debtor (drawer) to pay the lender (drawer) a certain amount of money at a certain place and within a specified time frame or by order of the lender to transfer funds to a third party.
A distinctive feature of a promissory note is that the debtor is always the person who wrote the promissory note, i.e. the drawer. The holder of the bill of exchange can use it in settlements with his counterparties, transferring his debt to the drawer.
The person issuing a promissory note is called the drawer. The person receiving the promissory note is called the holder of the promissory note. In fig. 1.4 is a diagram of the movement of a promissory note serving a commercial transaction.
A bill of exchange (bill of exchange) is an order (order) of a creditor (drawer), obliging the debtor (drawee) to pay the amount indicated in the bill of exchange to a third party (remitter) within the specified period.
The person who wrote the bill of exchange is called the drawer or drawer. The person receiving the bill of exchange is called the payee. The person who pays the bill of exchange is called the drawee.
A feature of the issue and circulation of a remittance bill is that it cannot serve as a simple means of payment. The payee, receiving the bill, is not sure that the drawee indicated in it will make the payment.
Therefore, initially it is necessary to make sure that the debtor agrees to pay the bill of exchange. For this, the bill is sent to the drawee for acceptance.
Seller (bill of exchange)
Vendor (end note holder)
bill of exchange
Fig. 1.4 – Scheme of movement of a promissory note serving a commercial transaction
Acceptance is a written consent to fulfill obligations under a bill of exchange.
The drawee’s consent is confirmed by an inscription on the face of the bill. It should be noted that the owner of the bill can transfer it to another person without the payer’s acceptance. However, an unaccepted bill of exchange is much less popular than bills for which the payer’s acceptance has been received. The acceptance can be full partial. Full acceptance means that the drawee will pay the amount indicated in the bill of exchange in full within the specified time frame. Partial acceptance means that the debtor agrees to pay only part of the amount. Consequently, the other part of the payment amount remains unaccepted. The holder of the bill must agree to partial acceptance and file a protest against the unaccepted amount. Thus, the holder of a bill has the right to present regressive claims against all persons obligated by the bill. In fig. 1.5 shows the flow chart of a bill of exchange.
Russia, XIX century. The Trekhgornaya Manufactory owes the bank 6,000 rubles. A merchant from Moscow owes the manufacture 10,000 rubles. The director of the manufactory issues a bill of exchange (draft) to the name of the bank, the payer of which is the merchant (the amount indicated in the bill is 6,000 rubles). Define:
1) How much will a merchant from Moscow owe the bank after accepting a bill of exchange?
2) How much will a merchant from Moscow owe Trekhgornaya Manufactory after accepting a bill of exchange?
After a merchant from Moscow accepts a bill of exchange, he will owe the bank 6,000 rubles, and the manufactory: 10,000-6,000 = 4,000 rubles.
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