Bonds are normally bought exactly one period before the first
coupon payment. This results in two problems. This affects the
discount period in the case of each cash flow and this
represents a daily problem of "accrual" of interest for the
bondholder. The buyer of a bond therefore pays the agreed price
of the bond plus the accrued interest or the aliquot interest
return. Financial markets should operate in such a way as to
allocate savings to the most productive companies, i.e. so that
they are allocated effectively. Such opportunities are
attractive for individual investors, as they lead to maximum
profit at minimum risk. If the managers of a financial
institution invest creditors funds into companies with a low
yield or a high rate of risk, then investors re-invest their
funds, increase the price that they demand for the funds (i.e.
increase the interest rates) or limit the investments made by
the financial institutions into certain companies on their
behalf. American depositary receipts American depositary