Escolar Documentos
Profissional Documentos
Cultura Documentos
Corporate capitalization
Earn money from business Issue stock
Ownership (equity) Limited liability
Issue debt
Bonds, notes Holder of note or bond is creditor of issuer
$1000 PAR
ABC Company
6/1/2025
PAR VALUE
Par (face, principal)
3 2010 Kaplan, Inc.
6%
2010 Kaplan, Inc.
Discount
4
Yield to Call
Reflects yield if bond is called on the call date
Highest yield for discount bonds Lowest yield for premium bonds
2010 Kaplan, Inc. 5 2010 Kaplan, Inc. 6
Par $1,000
6.00% 5.00%
Discount $800
Par $1,000
Discount $800
Duration
The greater the duration, the greater the volatility
2010 Kaplan, Inc. 10
Widens: Negative
Narrows: Positive
Yield
Yield
Maturity
11
Maturity
12
Secured Bonds
MORTGAGE BOND
2010 Kaplan, Inc.
Convertible Bond
$40
Convertible Bond
$40
$1250
2010 Kaplan, Inc.
$1,250
17 2010 Kaplan, Inc. 18
Duration = maturity
22
Interest-only (IO)
Sells at a discount Receives the interest Cash flow declines over time
24
CMO characteristics
Considered relatively safe in terms of default risk Taxed at all levels CMOs with complex characteristics may have a limited secondary market Customers required to sign a suitability statement before purchase 26
25