Corporate Bonds: Rapid Fire
Chapters in this video
- 0:00 Bond basics: par value, semiannual coupons, and T+1 settlement
- 2:30 Secured, unsecured, and the exact liquidation priority
- 3:53 Bond ratings measure default risk only, plus OID phantom income
- 5:25 Brokered CDs, ETNs versus ETFs, and the 270-day commercial paper cap
- 6:44 The yield ladder memory aid for discount and premium bonds
- 7:47 Rapid-fire exam recap
What this video covers
- Why secured bonds outrank unsecured debentures in bankruptcy, and the exact five-tier liquidation priority through common stock
- How bond ratings measure default risk only, never interest rate or market risk, and the investment-grade cutoff at BBB-/Baa3
- What original issue discount (OID) means for zero-coupon bond taxation: annual phantom income as ordinary income despite zero cash coupons
- Why brokered certificates of deposit (CDs) carry FDIC insurance against bank failure but not against market losses from selling early in rising-rate environments
- How exchange-traded notes (ETNs) differ from exchange-traded funds (ETFs): ETNs are unsecured issuer debt with zero tracking error, while ETFs hold underlying securities and carry no issuer credit risk
- The yield ladder memory aid for discount bonds (nominal yield less than current yield less than yield to maturity (YTM) less than yield to call (YTC)), premium bonds (the reverse), and why yield to worst equals the lowest of all possible yields
- Why convertible bonds pay a lower coupon than straight bonds, and how to calculate parity price of stock and parity price of bond from the conversion ratio
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