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Financial management CH 4-5 (Bond (corporate bond (debenture bond,…
Financial management CH 4-5
Annuities
Ordinary and deferred annuity
DUE: beginning
Bond
US Treasury Securities
note and bond
bill: less than one year
corporate bond
debenture bond
subordinated debenture bond
secured bond
general obligation bonds
Municipal securities or munis
revenue bonds
feature
affirmative convenants
Negative convenants
Structures
Original issue discount bonds
step up: company should increase its rate if upgrade
Zero- coupon
Bond
call provision
call premium
sinking founding
indexed bond
Valuation
current yield = payment / price
capital yield= change in price / beginning price
expected total return
market interest price:
Rd = r* + IP + DRP + LP + MRP
Term Structure Theories
Liquidity preference (premium) theory
Market segmentation theory
Pure expectations theory