A Firstline Securities Limited Blog by: Dalia King
I hope this message meets you all very well, healthy, happy and enjoying life. If not, take heart that brighter days must come.
Today I’m going to answer three questions that you either may have been wondering about but never asked; or after reading my answer, may realise you never knew what you didn’t know! So let’s get into it.
The name of our company is Firstline Securities Limited. We’ve been in business since 2005 but in late 2018, we began to use the phrase ‘Firstline Financial’ in our marketing material in order to bring an end to a decade answering variations of “do you sell alarms”, “I’m looking for guard work” and “what’s your canine rate”.
It’s understandable. Security, securities. Potato, potahtoe.
A financial security is a tradeable financial asset that holds monetary value. It can be divided into three main categories:
We placed “Securities” in our name because this is what we do on a daily basis – trade in the above financial assets.
Take a look at my fancy table:
|We offer: Investments||They accept: Deposits||Both earn you interest|
|Our clients issue: Bonds & Notes||They give: Loans||Both provide funding|
|Our Regulator: Securities & Exchange Commission||Their Regulator: Central Bank||Both work to protect you, the client|
If you’re smelling what I’m cooking, you now know that while we cannot give your business a loan, we can arrange for you to issue a note which investors will buy into. Potato, potahtoe*
* Ok, it’s more nuanced than this (for example, we provide funding to corporate clients only, not individuals) but you get the general idea. If you want to take a deeper dive into the differences, let me know.
Upfront, I want to say that this answer is going to cover the basics. It will be sufficient for dinner party conversation, but you will be unmasked as a fraud should you attempt to engage a CFA charter-holder. I know this because the CFA charter-holders (and candidates) in the office have advised that there is *so much more* I could have said. So much complexity. So many variables. “You haven’t even explained present value, indicated tenor, or discussed YTM!”
If you guys want to get into those complex variables, we’ll get the Portfolio Team to expand. For now, and in plain English:
|Investment||Purchase Price||Coupon||Annual Interest|
|$100,000||100 (par)||6.00% per annum||$6,000|
|$100,000||102 (premium)||6.00% per annum||$6,000|
|$100,000||98 (discount)||6.00% per annum||$6,000|
|Investment||Purchase Price||Coupon||Current Yield|
|$100,000||100 (par)||6.00% per annum||6.00%|
|$100,000||102 (premium)||6.00% per annum||3.92%|
|$100,000||98 (discount)||6.00% per annum||8.16%|
Which brings us to the original question: do you ‘lose’ when you buy at a premium?
All of that to say, no, there is no direct causal link or correlation between purchasing at a premium and losing money.
Ok, all this number-crunching has tired this attorney out, but I can easily catch a second wind.
Are there any other burning questions you need answered, like yesterday? Ask us! Even if I don’t have the answer, someone in the office should. We real smart over here. But more importantly, and all jokes aside – no question is a silly one; no answer is ‘obvious’. We welcome your curiosity – which has never killed any cat I ever knew.
Have a great weekend everyone!
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