Principles of Corporate Finance

Debt & Risk Year CF PV@YTM % of Total PV % x Year 1 90 82.95 .081 2 90 76.45 .075 3 90 70.46 .069 4 90 64.94 .064 5 1090 724 ...

Debt & Risk Year CF PV@YTM % of Total PV % x Year 1 90 82.95 .081 0.081 2 90 76.45 .075 0.150 3 90 70.46 .069 0.207 4 90 64. ...

Term Structure What Determines the Shape of the TS? 1 - Unbiased Expectations Theory 2 - Liquidity Premium Theory 3 - Market Seg ...

Yield To Maturity wAll interest bearing instruments are priced to fit the term structure. wThis is accomplished by modifying the ...

Yield to Maturity Example wA $1000 treasury bond expires in 5 years. It pays a coupon rate of 10.5%. If the market price of this ...

Yield to Maturity Example w A $1000 treasury bond expires in 5 years. It pays a coupon rate of 10.5%. If the market price of thi ...

Default, Premiums & Ratings The risk of default changes the price of a bond and the YTM. Book Example We have a 9% 1 year bo ...

Default, Premiums & Ratings Book Example We have a 9% 1 year bond. The built in price is $1000. But, there is a 20% chance t ...

Default, Premiums & Ratings Conversely - If on top of default risk, investors require an additional 2 percent market risk pr ...

u The Many Different Kinds of Debt Principles of Corporate Finance Brealey and Myers Sixth Edition Chapter 24 ...

Topics Covered w Domestic Bonds and International Bonds w The Bond Contract w Security and Seniority Asset-Backed Securities w R ...

Bond Terminology w Foreign bonds - Bonds that are sold to local investors in another country's bond market. w Yankee bond- a bon ...

Bond Terminology w Indenture or trust deed - the bond agreement between the borrower and a trust company. w Registered bond - a ...

Bond Terminology w Accrued interest - the amount of accumulated interest since the last coupon payment w Debentures - long-term ...

Bond Terminology w Sinking fund - a fund established to retired debt before maturity. w Callable bond - a bond that may be repur ...

Straight Bond vs. Callable Bond Value of straight bond 25 50 75 100 125 150 25 50 75 100 bond Value of Straight bond bond callab ...

Bond Terminology w Restrictive covenants - Limitations set by bondholders on the actions of the Corporation. w Negative Pledge C ...

Bond Terminology w Pay in kind (PIK) - a bond that makes regular interest payments, but in the early years of the bonds life the ...

Covenants w Debt ratios: ËSenior debt limits senior borrowing ËJunior debt limits senior & junior borrowing w Security: ËNeg ...

Event Risk: An Example October 1993 Marriott spun off its hotel management business worth 80% of its value. Before the spin-off, ...