Essentials of Investment 9ed Chaps 10-11

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1、CHAPTER10BONDPRICESANDYIELDS1.a.Catastrophebond:Typicallyissuedbyaninsurancecompany.Theyaresimilartoaninsurancepolicyinthattheinvestorreceivescouponsandparvalue,buttakesalossinpartoralloftheprincipalifamajorinsuranceclaimisfiledagainsttheissuer.Thisisprovidedinexcha

2、ngeforhigherthannormalcoupons.b.Eurobond:Theyarebondsissuedinthecurrencyofonecountrybutsoldinothernationalmarkets.c.Zero-couponbond:Zero-couponbondsarebondsthatpaynocouponsbutdopayaparvalueatmaturity.d.Samuraibond:Yen-denominatedbondssoldinJapanbynon-Japaneseissuers

3、arecalledSamuraibonds.e.Junkbond:ThoseratedBBBorabove(S&P,Fitch)orBaaandabove(Moody’s)areconsideredinvestmentgradebonds,whilelower-ratedbondsareclassifiedasspeculativegradeorjunkbonds.f.Convertiblebond:Convertiblebondsmaybeexchanged,atthebondholder’sdiscretion,foras

4、pecifiednumberofsharesofstock.Convertiblebondholders“pay”forthisoptionbyacceptingalowercouponrateonthesecurity.g.Serialbond:Aserialbondisanissueinwhichthefirmsellsbondswithstaggeredmaturitydates.Asbondsmaturesequentially,theprincipalrepaymentburdenforthefirmisspread

5、overtimejustasitiswithasinkingfund.Serialbondsdonotincludecallprovisions.h.Equipmentobligationbond:Abondthatisissuedwithspecificequipmentpledgedascollateralagainstthebond.i.Originalissuediscountbonds:Originalissuediscountbondsarelesscommonthancouponbondsissuedatpar.

6、Thesearebondsthatareissuedintentionallywithlowcouponratesthatcausethebondtosellatadiscountfromparvalue.j.Indexedbond:Indexedbondsmakepaymentsthataretiedtoageneralpriceindexorthepriceofaparticularcommodity.12.Callablebondsgivetheissuertheoptiontoextendorretirethebond

7、atthecalldate,whiletheextendableorputtablebondgivesthisoptiontothebondholder.3.a.YTMwilldropsincethecompanyhasmoremoneytopaytheinterestonitsbonds.b.YTMwillincreasesincethecompanyhasmoredebtandtherisktotheexistingbondholdersisnowincreased.c.YTMwilldecreasesincethefir

8、mhaseitherfewercurrentliabilitiesoranincreaseinvariouscurrentassets.4.Semi-annualcoupon=$1,0006%0.5=$30.AccruedInterest==$30(30/182)=$4.94