FI 311 note - 3 financial fundamentals: Capital structure,...

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3 financial fundamentals: Capital structure, Capital budgeting, Working capital management mortgage prepayments: If you increase amount for monthly payment, you’ll save on interest risk premiums: Helps investors determine how much they are making in each market as a reward for accepting risk; It is the additional return we earn by owing the risky portfolio; Is determined by subtracting Nominal Return from U.S. T.Bill. [Consists of High quality bonds with 20 or more years to maturity] Government bonds: Municipal bonds are federally and state tax exempt, for the issuing state. Zero-Coupon Bonds: exempt from State and Federal taxes, are offered at deep discounts “EST Spread” of a bond: It is a comparison of the yield to maturity of a corporate bond and an equivalent Treasury bond, with the same maturity; Basis Points; always positive; inverse relationship between bond ratings and yield spreads; The greater the risk that the borrower may default on the debt,
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This note was uploaded on 01/29/2012 for the course FI 311 taught by Professor Booth during the Summer '06 term at Michigan State University.

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