????(Sinking funds)

1
?????????

• ????
• ????????
• ?????
• ?????
• ?????
• ????????
• ????(Sinking funds)

2
????(?)

• ??????(Yield to Maturity)?
• ?????(Current yield)??????(Capital gains yield)
• ??????????
• ????????

3
????????

• ????,???????????????,??????????????????(?5??20??)?
  ??????????????????,??????????????????????.????????
  ?????,?10???100??.?????????????????.

4
?????
1. ?? ?????? ?????????. ??????????NT1,000,000.
??????NT100,000.?????NT100,000. 2. ????
??????????,??????,?????????.?????????????????,????
?????.
5
?????
3. ??? ????????????.???????,???????. 4. ???
????????.
6
????(Straight Bonds)
??,??????????????????????????????????.
7
?????

• ????(Straight bonds)???????????

• ??B0?????,I???????,i???????,P?????,T?????(??T???).
  
• ????????,I??P?????????2,i?????????2.

8
???????1

• ??A?????????,???100,000?,?????10,???????,????,???
  ???,?????12,????????????

9
?????(?1)
I100000x1010000. B010000/(112)10000/(112)
2 10000/(112)3 100000/(112)3
89297972711871178 95197(?)
10
???????2

• ??B?????????,???100,000?,?????10,??????,????,????
  ??,?????8,????????????

11
???????2
I100000x10/25000. B05000/(18/2)5000/(18/2
)2 5000/(18/2)3 5000/(18/2)4
100000/(18/2)4 480846234445427485480
103629(?)
12
???????

• ???????????????????????????????????,???????????,
  ??????????????,????????.
• ????????????,????????,????????.

13
?????

• 1.???? vs ????
• 2.???? vs ?????
• 3.???? vs ???
• 4.???? vs ????
• 5.???? vs ?????
• 6.???? vs ?????

14
1.???? vs ????

• ????(Coupon bonds)????????(coupon),???????????????
  .???????.
• ??????????(zero-coupon)??,??????????,???????,?????
  ?????,????????.?????????(Discount
  bonds)?????????10,??2???,?????????82.6446(100/(1
  .1)2).????82.6446?????,?????????,??????????100??.

15
2.???? vs ?????

• ???????????????????????.
• ???????????????????????,?????????????????????????.

16
3.???? vs ???

• ???????????????,??????,?1????10???????(T-notes),?1
  0????????(T-bonds).????????(T-bills).
• ?????????????.

17
4.???? vs ????

• ?????????????????????????.
• ??????????,???????????????????????????(????????)?
  ??.

18
5.???? vs ?????

• ?????(Convertible bonds)???????????????????,??????
  ?????????????????,????????????,?????????.
• ????????,??????????,????????.

19
6.???? vs ?????

• ?????(Callable bonds)??????????,???????????,??????
  ?????.
• ??,????????,?????????,?????????????.
• ?????????????,?????????,?????????.
• ????,????????????.
• ???????????????????.

20
???????????

• ?????????????????????????????.?????,?????????????
  ?.

21
????????

• ????????????????????,????????????????????,????????
  ????.

22
????(Sinking funds)

• ??????????????????????????????,???????????.
• ?????????????
• (1)???????????
• (2)??????????.

23
??????(Yield to Maturity)?

• ?????????????????????????,??????(?)???????
• ??????????????????????????????????.

24
????????

• ??B?????,I???????,P???,YTM????.

25
?????1

• ??????????,??100000?,?????12,???(????),??????,???
  ??95000?,?????????????

26
?????1

• ??
• 95000 12000/(1YTM)12000/(1YTM)2
• 100000 /(1YTM)2
• ?????????????YTM15.08

27
?????2

• ????????,??100000?,??????,?????95000?,????????????

28
?????2

• 95000100000/(1YTM)3
• ????YTM(100000/95000)1/3 -1
• 1.724

29
???????????

• ?????(Current yield)
• ??/????
• ?????????/????
• ???????YTM???????(Current yield)????????(Capital
  gains yield)??

30
?????????????

• ???100000?????10,?????,YTM?10.8,???105000?,?????
  ??.

31
?????????????

• ??
• current yield10000/1050009.52
• capital gains yield
• YTM - current yield
• 10.80-9.52
• 1.28

32

• ???????
• ?????

33
???????????????

• ???100000?????10,?????,YTM?10.8,???95248?,??????
  ?.
• Current yield10000/9524810.5
• Capital gain 10.8-10.50.3

34
???????,??????????????????????

• 1.?????????.
• 2.?????10000.??????
• 3.?YTM?????????????.

35
Answer

• P(1)95535
• Current yield10000/9553510.47
• Capital gain yield10.8-10.47
• 0.33

36
??????????

• ??Radcliffe(1997),?????????????
• 1.????????????,????????????
• 2.???????????????????
• 3.???????,??????????????????????

37
??????????

• 4.???????,???????????????????,??????????????
• ???5,10,15????,??????1,????????,????????.??(15??
  ???????10????????)??(10?????????5??????).

38
??????????

• 5.????????????,???????????????????????????????.
• ??Radcliffe,1997,Investment,5th. Ed. Addison
  Wesley.p.375-377.

39
????????

• ??????????
• 1.???????????????????.
• 2.?????????????????????????????????.

40
????????

• 3.??????,??????????????????.
• 4.???????,???????????????????.

41
???????1

• ????????????????100000???,?????10,??????,??YTM??1
  0.????????????,?????105000???????.????????6.
  ?????????????,?????????(YTM)???

42
???????1

• ??????????
• ???????
• 105000(10000???????)
• 105000(10000 6.051 )
• 166051
• ????????(Yield to Call)

43
???????1

• ???????????(16)5
• ????????????

44
???????1

• ????????,?????????10,????????????,????????!??????
  ??8.31.
• ??,?????????????,?????????.
• ??Radcliffe,1997,Investment,5th. Ed. Addison
  Wesley.p.403.

45
??????????????

• ??????????,?????????????.??????????????????????.

46
??????????????

• ???????15?????,????10,??100000?,??5?????120000???
  ??.
• ???????????10???????.

47
??????????????

• ????,????
• YTM7.135
• ??????YTM??7.135,??????????.???????????????????
  ??.(????????????,?????? )

48
??????????????

• ????YTM??7,??????

• ????YTM??6,??????

49
A 10-year, 10 semiannual coupon, 1,000 par
value bond is selling for 1,135.90 with an 8
yield to maturity. It can be called after 4 years
at 1,050. Whats the bonds nominal yield
to call (YTC)?
INPUTS
8 -1135.9 50 1050 N
I/YR PV PMT FV 3.568 x 2 7.137
OUTPUT
50
kNom 7.137 is the rate brokers would quote.
Could also calculate EFF to call EFF
(1.03568)2 1 7.26. This rate could be
compared to monthly mortgages, etc.
51
If you bought bonds, would you be more likely to
earn YTM or YTC?

• Coupon rate 10 vs. YTC kd 7.137. Could
  raise money by selling new bonds which pay
  7.137.
• Could thus replace bonds that pay 100/year with
  bonds that pay only 71.37/year.
• Investors should expect a call, hence YTC 7.1,
  not YTM 8.

52

• In general, if a bond sells at a premium, then
  (1) coupon gt kd, so (2) a call is likely.
• So, expect to earn
• YTC on premium bonds.
• YTM on par discount bonds.

53

• Disney recently issued 100-year bonds with a YTM
  of 7.5--this represents the promised return.
  The expected return was less than 7.5 when the
  bonds were issued.
• If issuer defaults, investors receive less than
  the promised return. Therefore, the expected
  return on corporate and municipal bonds is less
  than the promised return.

54
Bond Ratings Provide One Measure of Default Risk
Investment Grade Junk Bonds Moodys Aaa Aa A Baa
Ba B Caa C SP AAA AA A BBB BB B CCC D
55
What factors affect default risk and bond
ratings?

• Financial performance
• Debt ratio
• TIE, FCC ratios
• Current ratios

56

• Provisions in the bond contract
• Secured vs. unsecured debt
• Senior vs. subordinated debt
• Guarantee provisions
• Sinking fund provisions
• Debt maturity

57

• Other factors
• Earnings stability
• Regulatory environment
• Potential product liability
• Accounting policies

58
Top Ten Largest U.S. Corporate Bond Financings,
as of July 1999
Issuer Ford Motor Co. ATT RJR Holdings WorldCom S
print
Date July 1999 Mar 1999 May 1989 Aug 1998 Nov 1998
Amount 8.6 billion 8.0 billion 6.1
billion 6.1 billion 5.0 billion
59
Bankruptcy

• Two main chapters of Federal Bankruptcy Act
• Chapter 11, Reorganization
• Chapter 7, Liquidation
• Typically, company wants Chapter 11, creditors
  may prefer Chapter 7.

60

• If company cant meet its obligations, it files
  under Chapter 11. That stops creditors from
  foreclosing, taking assets, and shutting down the
  business.
• Company has 120 days to file a reorganization
  plan.
• Court appoints a trustee to supervise
  reorganization.
• Management usually stays in control.

61

• Company must demonstrate in its reorganization
  plan that it is worth more alive than dead.
• Otherwise, judge will order liquidation under
  Chapter 7.

62

• If the company is liquidated, heres the payment
  priority
• 1. Secured creditors from sales of secured
  assets.
• 2. Trustees costs
• 3. Wages, subject to limits
• 4. Taxes
• 5. Unfunded pension liabilities
• 6. Unsecured creditors
• 7. Preferred stock
• 8. Common stock

63

• In a liquidation, unsecured creditors generally
  get zero. This makes them more willing to
  participate in reorganization even though their
  claims are greatly scaled back.
• Various groups of creditors vote on the
  reorganization plan. If both the majority of the
  creditors and the judge approve, company
  emerges from bankruptcy with lower debts,
  reduced interest charges, and a chance for
  success.