Callable Bonds Term Paper Example | Topics and Well Written Essays - 3000 words

Callable Bonds - Term Paper Example There are different reasons as to why companies issue callable bonds, as noted by Frykman and Tolleryd, one of the reasons as to why companies issue callable bonds is because of their hedge interest rate (173). The point is that, the moment interest rates reduce, the issuing companies can then repay the bonds at lower interest rates. This paper aims at examining callable bonds. Overview As explained by Le callable bonds allows those borrowing the option of re-investing if the interest rates reduces (4). This implies that companies are able to hedge against likely reduction of interest rates in future. It is because of this aspect tha makes callable bonds to be prefered by many investors particularly before 1990s. In deed, before 1970, nearly all companies issued bonds that had were callable. But, as from 1970 to 1990, callable bonds being issued reduced to about 80%. This was attributed to developents that had taken place within the interest rate derivaive markets over that period. P resently, the number of callable bonds on the market has greatly reduced accounting for less than 30%. According to Le the reason for this reduction is the fact that, it has become easier for companies to hedge against the interest rate risks (4). Explaining callable bonds When a company issues a bond, it has to make a critical decision regarding the type of bond it will issue, if it will be a callable bond or a regular one. In defining a callable bond Brigham and Houston states that callable bond, also known as redeemable bond is a kind of bond that permits the issuing firm to retain the benefit of trading in the bond at a certain time before the maturity date (220). This implies that the issuing firm retains the right of buying back the callable bond, though it is not obligated to do that. Basically, the bonds are not in actual sense bought back by the issuing firm; rather the firm cancels them immediately. When recalling the callable bonds, the issuing firm has to pay more than t he par price. In some cases, for example in high-yield debt industry, the call premium could be considerable high. Therefore, the issuing firm has a choice, of either paying a higher premium or waiting until the bonds mature. Brigham and Houston notes that supposing the interest rates prevailing in the market go down at the time of calling back the bonds, then the issuing company will be in a position to refinance its debt cheaply (220). Accordingly, as the interest rates reduce, the value of the bonds increases, thus, it is beneficial to re-buy the bonds at their par value. When callable bonds are used, the investors are given the advantage of a higher token or value, as opposed to what they have gained with regular bonds. However, when the interest rates reduce, the issuing firms will likely recall the bonds and just invest them at interest rate is low. The moment a company has recalled the bond, the company can as well reissue the similar bonds at a much lower interest rate. This process of reissuing bonds to save money on the interest payment is referred as refunding. Brigham and Houston notes that before the bonds are recalled, the bond holders are informed by a letter, one of the agreements when investing in a callable bond (221), is that the investors agree that the bonds can be bought back and the investors should be ready to sell the bonds. However, companies recalling the bonds

Nowledge Management Case Study Example | Topics and Well Written Essays - 2750 words

Nowledge Management - Case Study Example This new concept of knowledge management has enhanced the progress of most institutions it turns personal knowledge to be the institutions asset and therefore it is widely used within the institution. Ones knowledge can be mixed with other values and insights to be applied in the organizations practices and routines this is according to Eardley and Uden (2011). Within a school setup, this can also be attained through enabling better processing methods for knowledge and through this better communication can be achieved and shared to others . Schools that practice knowledge management only focus on not repeating same mistakes and diversifying their thinking to avoid duplicate works. Wisdom high school is an average sized school with a population of six hundred students and forty teachers and twenty-five non-staff members. They all work together to provide quality service to its students and community. All workers exchange information among themselves on how to co-operate in work for be st outputs. This can be done through formal and informal ties and training among themselves. Networking system can also be encouraged to enhance access to information and exchanges between workers. Knowledge management faces several challenges in its implementation, but with the developments in computer networking, cooperation and consultations have been enhanced. It is enhances the support of decisions by more people within the organization and rejection if it is not appropriate. Therefore, this supports. Working within the school setup involves educating scholars and decision making on issue that affects the whole school society. Schools should know about current trends in the learning systems and therefore, try to embrace them to promote current discourse on academic issues. This creates advancements in performance and creates more interest from both scholars and staff to learn new ideas. Many learning institutions have been undergoing many weaknesses units management, therefore, to improve on its knowledge management it can focus on giving training to its personnel about current affairs in the economy and within the school institution (Pauleen, 2007). Some of the problems are because of lack of knowledge on what the institution is engaging in. There is need for understanding the concepts of knowledge management. This will help the institution determine on whether it is ready to engage in knowledge management. There is also the problem of social relations. The installation of technology should not stop direct confrontations and consultations. The institution should also not expect to acquire new knowledge but should instead focus on improving the existing one. This institution with both formal and informal personnel needs to have knowledge bases from where they can get their knowledge. According to their roles, there is need for diversified fields at the base. There is need for planning knowledge that helps guide the institution to its goals and objectives. It also helps in classifying needs giving priority to the most urgent and primary. Descriptive knowledge is also necessary to help the personnel understand the type of individuals they handle. Other kinds of knowledge are the predictive knowledge and assessment knowledge too. They apply in relating to customers, in sales and in management of finances. Therefore, to ensure proper relations between employees and workers, proper