Amortizing Security
It seems like there's a Rick & Morty joke here. "An amortizing security is the sidekick of an a-rick-izing security" - something like that. We'll work on it.
In the meantime, here's what a real amortizing security is: it's a type of bond where, beyond the normal interest payments, part of the principal is paid out in regular installments as well. The security comes with a schedule for the repayment of the principal, as well as the yield on the bond.
There are many kinds of amortizing securities, though mortgage-backed securities represent the most high-profile variety.
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Finance: What is Bond Amortization?7 Views
Finance a la shmoop what is bond amortization? okay fancy term easy
concept the basic idea is that you have to "revalue" what a bond is
actually worth each period which usually means twice a year because bonds pay [Monthly calendar appears]
interest on the you know semester system yeah twice a year so let's say you've
paid seven hundred bucks for a bond with a 5% coupon which comes due for a
thousand bucks in ten years over that time you'll have received two things the
5% per year interest from the bond in cash paid along the way and the [5% interest per year appears]
appreciation of the 700 bucks to become the thousand dollar par value at which
point it will eventually pay back its principal so to amortize the $300 of
appreciation of that bond over ten years while you could attribute 30 bucks a
year in appreciation each year such that after we'll say three and a half years
you'd hold the bond as having appreciated 3.5 times 30 bucks or $105 [Straight line appreciation formula appears]
in appreciation making the bond worth at that point in time eight hundred five
dollars oh yeah fancy but also pretty easy
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