Productivity at your daily life

Since the early 1900s, bonds have been assigned quality ratings that reflect their probability of going into default. The three major rating agencies are Moody’s Investors Service (Moody’s), Standard & Poor’s Corporation (S&P), and Fitch Investors Service. Moody’s and S&P’s rating designations are shown in Table 4-1.14 The triple- and double-A bonds are extremely safe. Single-A and triple-B bonds are also strong
enough to be called investment grade bonds, and they are the lowest-rated bonds that many banks and Read the rest of this entry »

Development Bonds Some companies may be in a position to benefit from the sale of either development bonds or pollution control bonds. State and local governments may set up both industrial development agencies and pollution control agencies. These agencies are allowed, under certain circumstances, to sell tax-exempt bonds, then to make the proceeds available to corporations for specific uses deemed (by Congress) to be in the public interest. Thus, an industrial development agency in Florida might sell bonds to provide funds for a paper company to build a plant in the Florida Panhandle, where unemployment is high. Read the rest of this entry »

At times, Savannah Electric was unable to issue any new first mortgage bonds because of another indenture provision: its interest coverage ratio (pre-interest income divided by interest expense) was below 2.5, the minimum coverage that it must have in order to sell new bonds. Thus, although Savannah Electric passed the property test, it failed the coverage test, so it could not issue any more first mortgage bonds. Savannah
Electric then had to finance with junior bonds. Because first mortgage bonds carried lower interest rates, this restriction was costly. Read the rest of this entry »

Mortgage Bonds Under a mortgage bond, the corporation pledges certain assets as security for the bond. To illustrate, in 2002 Billingham Corporation needed $10 million to build a major regional distribution center. Bonds in the amount of $4 million, secured by a first mortgage on the property, were issued. (The remaining $6 million was financed with equity capital.) If Billingham defaults on the bonds, the bondholders can foreclose on the property and sell it to satisfy their claims. Read the rest of this entry »

Default risk is affected by both the financial strength of the issuer and the terms of the bond contract, especially whether collateral has been pledged to secure the bond. Several types of contract provisions are discussed below. Read the rest of this entry »

You bought new house or apartment but it is still empty and need frontal interior decoration. Or you have been living in the same house and feel boring, well do not make quick judgment by finding new place. Look around you, maybe every piece of your furniture is out of date. All you have to do simply get rid of old furniture and accessories then start to dig information about new interior accessories which are provided by many online shop. Read the rest of this entry »

Another important risk associated with bonds is default risk. If the issuer defaults, investors receive less than the promised return on the bond. Therefore, investors need to assess a bond’s default risk before making a purchase. Recall from Chapter 1 that the quoted interest rate includes a default risk premium—the greater the default risk, the higher the bond’s yield to maturity. The default risk on Treasury securities is zero, but default risk can be substantial for corporate and municipal bonds. Read the rest of this entry »

As we saw in the preceding section, an increase in interest rates will hurt bondholders because it will lead to a decline in the value of a bond portfolio. But can a decrease in interest rates also hurt bondholders? The answer is yes, because if interest rates fall, a bondholder will probably suffer a reduction in his or her income. For example, consider a retiree who has a portfolio of bonds and lives off the income they produce. The bonds, on average, have a coupon rate of 10 percent. Now suppose interest rates decline to 5 percent. Read the rest of this entry »

The values of the 1-year and 14-year bonds at several current market interest rates are summarized and plotted in Figure 4-3. Note how much more sensitive the price of the 14-year bond is to changes in interest rates. At a 10 percent interest rate, both the 14-year and the 1-year bonds are valued at $1,000. When rates rise to 15 percent, the 14-year bond falls to $713.78, but the 1-year bond only falls to $956.52. Read the rest of this entry »

When we talk about fashion and style, it is not only about the clothing but also the accessories which make the appearance more attractive to look at, such as shoes, bags, hats, and jewellery. Different from others, jewellery is kind of accessories which can bring out the charm of you. You can look sophisticated, unique, or even classy by wearing it. It is also perfect and fancy gift for someone who is close to you. Read the rest of this entry »