UiTM’s Academic Integrity Pledge

By signing this form, I agree to act in a manner that is consistent with UiTM’s academic
assessment and evaluation policy and processes. I will practice integrity in regard to all
academic assessments, and pursue scholarly activities in UiTM in an open, honest, and
responsible manner. I will not engage or tolerate acts of academic dishonesty,
academic misconduct, or academic fraud that include but are not limited to:

a. Cheating: Using or attempts to use any unauthorized device, assistance,

sources, practice or materials while completing academic assessments. This
include but are not limited to copying from another, allowing another to copy,
unauthorized collaboration on an assignment or open book tests, or engaging in
other behavior that a reasonable person would consider to be cheating.
b. Plagiarism: Using or attempts to use the work of others (ideas, design, words,
art, music, etc.) without acknowledging the source; using or purchasing materials
prepared by another person or agency or engaging in other behavior that a
reasonable person would consider plagiarism.
c. Fabrication: Falsifying data, information, or citations in any formal academic
assessment and evaluation.
d. Deception: Providing false information to an instructor concerning a formal
academic assessment and evaluation.
e. Furnishing false information: Providing false information or false
representations

As a student of UiTM, I am expected to conduct myself in a manner that exemplifies

honesty and integrity. If for any reason, I am found to be violating the policies set out by
UiTM, I understand that disciplinary action can be taken against me.

Syafiqah Hazif
__________________

Name: NORSYAFIQAH BINTI MUHAMMED HAZIF

Matric Number: 2019250896
Programme code: BA11115
Faculty / Campus: UITM PAHANG KAMPUS RAUB
*Students are required to sign one pledge for each course taken.

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 FACULTY OF BUSINESS AND MANAGEMENT
ASSIGNMENT/ PROJECT DECLARATION FORM

Student’s Name : NORSYAFIQAH BINTI MUHAMMED HAZIF

Student’s ID : 2019250896 Student’s I/C No. : 011124-14-0712

Program Code : BA111 Part : 5 Course Code : FIN358

Course : INVESTMENT MANAGEMENT

Name

Assignment/ Due Submission

Project No. : 1 Date : 14 NOV 2021 Date : 14 NOV 2021

Assignment/ : INDIVIDUAL ASSIGNMENT

Project Title

Lecturer’s Name : ILYANI BINTI AZER

I hereby declare that the work in this assignment/ project was carried out in accordance with the
regulations of Universiti Teknologi MARA. It is original and is the results of my own work, unless
otherwise indicated or acknowledged as referenced work. This assignment/ project has not been
submitted to any other academic institution or non-academic institution for any degree or qualification.

I acknowledge that I have been supplied with the Academic Rules and Regulations for Universiti
Teknologi MARA’s Diploma/ Bachelor Degree/ Master’s Degree students, regulating the conduct of my
study and exams.

I hereby declare that this assignment/ project is written by me and:

i. is a result of my own work;
ii. has not been used for another assessment at another department/ university/ university college in
Malaysia or another country;
iii. does not refer to/quote works of others or own previous writings without stating it both in the text and
in the reference list;
iv. mentions explicitly all sources of information in the reference list; and
v. will go through similarity check (Turnitin).

I am aware that disciplinary action (which may include the deduction of marks in the assignment/ project)
will be taken against me if I am found to be an offender.

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14 NOV 2021
Syafiqah Hazif
Date Student’s Signature

3
UNIVERSITI TEKNOLOGI MARA KAMPUS RAUB, PAHANG

FACULTY OF BUSINESS MANAGEMENT

OCTOBER 2021 – FEBRUARY 2022

INVESTMENT MANAGEMENT (FIN358)

ASSIGNMENT TITLE:

THE FINANCIAL SECURITY OF BOND

PREPARED BY:

NAME: NORSYAFIQAH BINTI MUHAMMED HAZIF

STUDENT ID: 2019250896

GROUP/CLASS: BA1115G

PREPARED FOR:

MADAM ILYANI AZER

SUBMISSION DATE:

14TH NOVEMBER 2021

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 TABLE OF CONTENT

NO. CONTENT PAGES

1.0 INTRODUCTION 6
2.0 DEFINITION OF BOND 7
3.0 WHY DO PEOPLE INVEST IN BOND? 8

i. Investor will receive fixed income

ii. Investor face low risk
iii. Diversification

4.0 HOW BONDS WORK? 9

5.0 ARE BOND A GOOD INVESTMENT IN 2021? 10
6.0 WHO IS PARTIES THAT INVOLVED IN BOND? 11

i. Issuer
ii. Trustee
iii. Investor

7.0 CONCLUSION 12
8.0 REFERENCE 13

5
1.0 INTRODUCTION

Financial security is the sense of well-being we experience when we are not concerned
about money. This frequently means having enough money to meet costs comfortably, being
debt-free, and having emergency funds. A security is a financial asset or instrument that has
value and may be purchased, sold, or exchanged. Stocks, bonds, options, mutual fund shares,
and exchange-traded fund shares are some of the most prevalent types of securities.

Financial securities are classified into four types, equity securities, hybrid securities,
derivative securities and debt securities. Equity securities represent a part of ownership in an
entity, most typically a firm. A share of a company's stock is the most typical example of an
equity security. Next, is hybrid securities. Hybrid securities act in some respects like debt
securities and in others like equity instruments. A convertible bond is the most popular sort of
hybrid asset. These act similarly to bonds in that they make monthly payments, but they vary in
that they may also be converted into a certain number of shares of stock at the holder's choice.
After that, derivative is a security whose value is determined by the value of a certain asset or
group of assets. A derivative is often a contract between two parties for the purchase or selling
of a certain asset or pool of assets. Derivatives are frequently used to manage risk by
individuals and institutions, but they may also be used speculatively by investors to generate
money. Lastly, Debt securities, such as corporate bonds, government bonds, and certificates of
deposit, are basically loans. Owners of debt securities lend a certain amount of money to
another party. That party is then required to make pre-determined interest payments to the
owner at regular intervals under the conditions stipulated in their agreement until the instrument
matures, at which point the debtor must repay the security owner in the amount of the principal.

A debt security such as a bond serves two functions. On the one hand, it grants a firm,
government, or other organizations temporary access to the capital of the security owner. On
the other side, it allows the security owner to earn monthly interest payments for a certain length
of time in exchange for the temporary use of their money until it is returned to them in full at a
predetermined date.

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2.0 INTRODUCTION TO BOND

Bonds are debt instruments in which an investor loans plutocrat to an establishment or

government for a specified length of time in exchange for journal interest payments. When the
bond matures, the bond issuer repays the investor's plutocrat. Bonds are occasionally
appertained to as having a fixed income since your investment generates regular payments
during the life of the bond. Companies, cosmopolises, countries, and autonomous governments
use bonds to raise finances and support a range of systems and conditioning.

Bonds have several characteristics. Starting with face value. The face value of a bond is the
quantum of plutocrat that the holder will admit when the bond matures. Next is coupon rate. The
coupon is the quantum of plutocrat entered by the bondholder as interest payments. It's
generally represented as a chance of the original investment. It's called a “coupon” because
certain bonds have a physical presence that you can tear off and redeem for interest. Likewise,
coupon payment means if a bond pays a coupon of 10% and its face value is RM10,000 its
interest would be RM1000 annually. Other than that, maturity date. Maturity is the day on which
the top quantum of a note, draught, acceptance bond, or other debt instrument becomes due
and is repaid to the investor, and interest payments end. It's also considered as the deadline for
repaying an investiture loan in full. Majorities can be as short as three months and as long as 30
times. Incipiently, the issue price is the original price at which the bond issuer offers the bonds.

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3.0 WHY DO PEOPLE INVEST IN BOND?

i. Investor will receive fixed income

The main purpose for purchasing a bond is for the income. Most bonds have a set interest
rate and provide semi-annual payments to investors. This provides certainty of both cash flow
and return, which other investments, such as stocks, do not. For example, if you purchase a
RM1,000 bond that pays 5% interest, you will get RM25 twice a year for the life of the bond.
You'll also get your RM1,000 back at the end of the bond's life, which is known as the maturity
date.

ii. Investor face low risk

All investments include some level of risk, although bonds are typically thought to be less
dangerous than stocks. Few investments, including stocks, promise to return your money at
maturity in the same manner that bonds do. This repayment promise, however, is only as good
as the issuer's financial health. Many bonds are assigned letter grades by outside rating
agencies to assist you assess their relative security. The bonds that are most likely to fulfil
payments as pledged are accorded a rating of AAA on most measures.

iii. Diversification

Diversification is the practice of investing in a variety of assets in order to reduce the total
risk of your portfolio. Most asset allocation models, which split assets among stocks, money
market funds, and other forms of investments, include bonds as a component. Bonds, which
normally vary in value less than stocks, help smooth out portfolio fluctuations and reduce overall
risk. In general, asset allocation models advise that older or more cautious investors spend a
larger portion of their money in money market funds or short-term bonds rather than equities.

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4.0 HOW BONDS WORK?

Bonds, also known as fixed- income instruments, are one of the primary asset types that
most individual investors are familiar with, alongside stocks and cash coequals. When a
company or other reality needs to raise finances to fund new systems, sustain continuing
operations, or restructure being scores, it may offer bonds to investors directly. The borrower
issues a bond that specifies the loan conditions, interest payments, and the time frame for
repaying the lent cash. The interest payment is part of the return on investment that
bondholders admit for advancing cash to the issuer. The pasteboard rate is the interest rate that
affects the payment.

Utmost bonds have an original price of face value, or face value for individual bond. The real
request price of a bond is determined by several variables, including the issuer's credit standing,
the length of time until expiration, and the coupon rate in relation to the overall interest rate
terrain at the moment. The face value of the bond is what the borrower will get when the bond
matures.

Utmost bonds can be vended to other investors by the first bondholder after they've been
issued. In other words, a bond investor isn't needed to retain a bond until it matures. It's also
typical for bonds to be reacquired by the borrower if interest rates fall or if the borrower's credit
improves and it may issue new bonds at a cheaper cost

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5.0 ARE BOND A GOOD INVESTMENT IN 2021?

Bonds may be a better investment for you than stocks if you are the threat-antipathetic kind
who cannot stand the study of losing plutocrat. Bonds are a fantastic system to diversify your
portfolio and cover yourself against request volatility if you're heavily invested in stocks.

The interest rates paid on bonds have been truly low because the Federal Reserve cut
interest rates in response to the 2020 profitable extremity and the performing recession. Still,
they may conclude to invest in bonds with short- term majorities, if investors believe that interest
rates are going to rise in the coming couple of times. Again, investors can always sell a
Treasury bond before its maturity date. There could be a gain or loss, meaning you might not
get all of your original investment returned to you. Also, please consider your trouble
forbearance. Treasury bonds, notes, and shorter- term storeroom bills are constantly bought by
investors for their safety. Still, you might conclude for a Treasury security despite their low-
interest rates in the current terrain. If you believe that the overall requests are too serious and
your thing is to save your wealth. We can see from the chart below that Treasury yields have
declined over the last several months.

Last but not least, despite their low yields, bond investments can give stability against the
background of an changeable equity portfolio. Whether copping a Treasury security is right for
you depends largely on your trouble forbearance, time horizon, and financial pretensions.
Please consult a financial counsel or financial journal when considering whether to buy any type
of bond versus other investments.

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6.0 WHO IS PARTIES THAT INVOLVED IN BOND?

The bond market is primarily divided into three major primary participants or groupings. The
issuer, trustee and investor.

i. Issuer

The issuer is responsible for dealing bonds in the bond request to fund the
operations of the associations. This part of the request generally comprises of
governments, banks and pots, out of which the major bone is the government, which
uses the bond request to in funding a country's operations. Other issuers correspond of
banks and marketable realities which issue bonds to fund their operations.

ii. Trustee

A trustee of a trust deed is responsible for securing any issue of a bond. The trustee
can be an individual person, member of board, a company or a bank appointed with the
blessing of the SECP. A trustee in the case of Bonds is basically a holding service who
has the power of administration for managing dealings related to bonds. They are
trusted to make opinions in the heir’s swish interest. The primary part of a trustee is to
take possession of the trust property in agreement with the vittles of the trust deed and
exercise due assiduity to ensure compliance by the issuer with the vittles of the trust
deed.

iii. Investor

The final player in the bond request is the one who buys the debt that is being issued
in the request. It can be an individual or a group who commits capitalist to investment
products with the anticipation of financial return. Generally, the primary concern of an
investor is to reduce trouble while maximizing return, as opposed to a trouble- taker, who
is willing to accept an advanced position of trouble in the expedients of collecting
advanced-than-average earnings.

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7.0 CONCLUSION

In conclusion, bonds are a type of debt security. Bondholders are guaranteed a return on
their investment and have a higher claim than shareholders. A bond characterized by its face
value, coupon rate, maturity, coupon payment and issue price. Bond are not risk free, it is
always possible especially in the case of corporate bonds for the borrower. Most investors can
improve their balance between risk and return by placing some of their portfolio in different bond
investments, both investment-grade and high yield. As with stocks, you can do well for yourself
by selecting the right bond investments even if you choose not to adjust your portfolio once you
set it up.

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8.0 REFERENCES

When is a bond’s coupon rate and yield to maturity the same? (2021, July 22). Investopedia.

https://www.investopedia.com/ask/answers/051415/when-bonds-coupon-rate-and-yield-
maturity-same.asp

Bond Characteristics | JamaPunji. (2018). Cybervision International. Retrieved 2018, from

https://jamapunji.pk/knowledge-center/bond-characteristics

Napoletano, E. (2021, August 24). Fixed-Income Basics: What Is A Bond? Forbes Advisor.

https://www.forbes.com/advisor/investing/what-is-a-bond/

Parties Involved in a Bond | JamaPunji. (2018). Cybervision International.

https://jamapunji.pk/knowledge-center/parties-involved-bond

Characteristics of bonds | Desjardins. (2021). Desjardins.Com.

https://www.desjardins.com/ca/co-opme/action-plans-tips/savings-investment/characteristics-
bonds/index.jsp

Treasury Bonds: A Good Investment for Retirement? (2021, September 28). Investopedia.

https://www.investopedia.com/ask/answers/041515/treasury-bond-good-investment-
retirement.asp

Staff, T. (2021, October 27). What Is a Financial Security? Definition, Examples, and FAQ.
TheStreet.

https://www.thestreet.com/dictionary/s/security

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