321Class06-Bonds

321Class06-Bonds - Debt Give me a lever, and I can move the...

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Debt Give me a lever, and I can move the World— Archimedes
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The “Lever”
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Debt Policy Firm capital structure does not matter Law of Conservation of Value
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Bond Definition A bond is a long-term contract to: 1. make fixed payments to the bondholder 3. and par value at maturity. •. A “debt instrument” for corporations to finance long-term debt
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Types of Corporate Debt Long-term debt Bonds Short-term Accounts Payable Commercial Paper Notes
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Bond terminology Face/Par Value Market Value Coupon Interest Rate Spot Rate Basis Point Yield Yield-To-Maturity Yield-To-Call
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Issuers: Treasury bonds Municipal bonds Corporate bonds Where Issued: Domestic bonds Foreign bonds Eurobonds Features: Call Convertible Warrants Income bonds Indexed bonds STRIPS Payments: Coupon or Zero-coupon Fixed or Floating rate Registered or Bearer bonds
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Secured Bonds Secured or unsecured (debenture/indenture) Asset based debt Payor, Trustee, Debtholder Equipment Trust Certificate Mortgage bonds
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321Class06-Bonds - Debt Give me a lever, and I can move the...

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