投资学Chap014.ppt

Figure 14.6 Prices over Time of 30-Year Maturity, 6.5% Coupon Bonds 14-* YTM vs. HPR YTM YTM is the average return if the bond is held to maturity. YTM depends on coupon rate, maturity, and par value. All of these are readily observable. HPR HPR is the rate of return over a particular investment period. HPR depends on the bond’s price at the end of the holding period, an unknown future value. HPR can only be forecasted. 14-* Figure 14.7 The Price of a 30-Year Zero-Coupon Bond over Time 14-* Rating companies: Moody’s Investor Service, Standard Poor’s, Fitch Rating Categories Highest rating is AAA or Aaa Investment grade bonds are rated BBB or Baa and above Speculative grade/junk bonds have ratings below BBB or Baa. Default Risk and Bond Pricing 14-* Coverage ratios Leverage ratios Liquidity ratios Profitability ratios Cash flow to debt Factors Used by Rating Companies 14-* Table 14.3 Financial Ratios and Default Risk by Rating Class, Long-Term Debt 14-* Figure 14.9 Discriminant Analysis 14-* Altman Z Score Z-scores below 1.23 indicate vulnerability to bankruptcy, scores between 1.23 and 2.90 are a gray area, and scores above 2.90 are considered safe. 14-* Sinking funds – a way to call bonds early Subordination of future debt– restrict additional borrowing Dividend restrictions– force firm to retain assets rather than paying them out to shareholders Collateral – a particular asset bondholders receive if the firm defaults Protection Against Default 14-* Default Risk and Yield The risk structure of interest rates refers to the pattern of default premiums. There is a difference between the yield based on expected cash flows and yield based on promised cash flows. The difference between the expected YTM and the promised YTM is the default risk premium. 14-* Figure 14.11 Yield Spreads 14-* Credit Default Swaps A credit default swap (CDS) acts like an insurance policy on the default risk of a corporate bond or loan. CDS buyer pays annual premiums. CDS issuer agree