Part Two: The Trading Department
Introduction:
It is just above freezing as you walk down the street but you are sweating! You are on your way towards your office. You are very happy with the idea of changing job, but the first day is always difficult in a new activity.
You are so focused on thinking about the new job that you nearly fall off the pavement. Your foot hurts. You almost swear in anger but notice an old lady watching you with a look that suggests you are completely mad. 'Relax, relax!' you tell yourself. 'It is nothing so new. You are in the same enterprise with the same surroundings and with the same president'. You are trying to think about different things but it is difficult. You can't wait to get to your new place of work.
When you arrive at the trading department, a real spectacle greets your eyes; everybody is speaking on the phone, there is a lot of noise and two or three computer screens face each person.
You move towards the first person you see and say, "Good morning! I am the new assistant."
He waves his finger at you and gestures to the phone that he has just picked up. As you look around, it seems that everyone is simply too busy to be able to help - time costs money when you are dealing with clients!
Eventually, a woman hurries across from a side office and moves towards you.
'Sorry we didn't take care of you when you arrived, bit of a traumatic time - the Bank of England has just announced a rise in interest rates by 25 base points and our clients were concerned about their portfolios, so we had to phone them'. 'My name is Sara and I am in charge of the Trading Department in Biz/ed Investment Bank. Welcome to the department. I hope you will enjoy your time in this new and exciting position. Your references are excellent and I think you are the ideal person for the job'. |
Over the few next days, you start to become acquainted with the job. There were a number of new things about bonds that you discover and some that you have to remember from your first job:
Revision
- Principal (or face value): the amount of money that is lent to the enterprise, which is also the sum they are going to pay back in the future.
- Interest rate: the percentage or yield the firm is going to give the lender periodically for the use of the money - the price of borrowing money.
- Coupon: the quantity of money received periodically. This is the interest rate on the principal.
- Maturity (or red date): the date when the bond finishes its payments and the principal is paid back to the owner of the bond by the enterprise that issued the bond.
- Price: the amount paid for the bond. It is quoted as a percentage of the principal.
Sara spends some time going through some basics with you....