Two bonds have the same yield but one has a 4% coupon and one has a 5% coupon, which has the higher price? Why? What if they have the same coupon but different yields? Will the higher or lower yield have a higher price? What if they have the same price, etc.
Understand the relationship between coupon, price and yield.
You own a 5 year bond and a 10 year bond, interest rates fell 1% this morning on both, which lost more value? Why?
This to all my hatin' folks seeing me getting guac right now..
Know the difference between a General Obligation bond (say "Gee-Oh") & Revenue bonds. GO's are financed by taxing a specified population, revenue bonds are financed by revenues from say, a power plant or toll road. Many GO's are "unlimited ad valorem" which means that the issuer can legally tax the populace in unlimited amounts to pay debt service. This did not occur in the Detroit bankruptcy (largest ever) due to population loss combined with an impoverished population making this politically untenable. Say you're excited about our nation's infrastructure needs fueling the demand for this sort of business. Pre-crisis most bonds were issued with secondary insurance, most of these went bankrupt during the crisis due to liabilities that weren't related to the muni part of their business. Now only like 5% of bonds are insured, making for a much more varied pricing structure between all the different ratings categories of bonds.
Right but a retail buyer of the bonds would see "unlimited" in the bond's description. Jefferson county was also an example of state law (needed state congress approval to raise taxes, language was buried on like page 100 of the official statement) superseding an unlimited GO pledge.
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For an internship just know why public finance and simple bond math. You won't be doing anything technical
Two bonds have the same yield but one has a 4% coupon and one has a 5% coupon, which has the higher price? Why? What if they have the same coupon but different yields? Will the higher or lower yield have a higher price? What if they have the same price, etc.
Understand the relationship between coupon, price and yield.
You own a 5 year bond and a 10 year bond, interest rates fell 1% this morning on both, which lost more value? Why?
Know the difference between a General Obligation bond (say "Gee-Oh") & Revenue bonds. GO's are financed by taxing a specified population, revenue bonds are financed by revenues from say, a power plant or toll road. Many GO's are "unlimited ad valorem" which means that the issuer can legally tax the populace in unlimited amounts to pay debt service. This did not occur in the Detroit bankruptcy (largest ever) due to population loss combined with an impoverished population making this politically untenable. Say you're excited about our nation's infrastructure needs fueling the demand for this sort of business. Pre-crisis most bonds were issued with secondary insurance, most of these went bankrupt during the crisis due to liabilities that weren't related to the muni part of their business. Now only like 5% of bonds are insured, making for a much more varied pricing structure between all the different ratings categories of bonds.
[quote=coreytrevor]
Right but a retail buyer of the bonds would see "unlimited" in the bond's description. Jefferson county was also an example of state law (needed state congress approval to raise taxes, language was buried on like page 100 of the official statement) superseding an unlimited GO pledge.
Soluta eos consequatur distinctio quasi rerum sed aut. Aut dolor et veritatis recusandae odio velit. Rerum dolores exercitationem sit praesentium. Eligendi nisi accusamus porro.
Quis et omnis dolores maiores. Est voluptatem est nisi aliquam perspiciatis architecto eius. In doloribus ad exercitationem architecto amet minus. Ab non ipsam et dolores consequatur qui ipsa. Dolor est nobis natus officia. Molestiae et id corrupti libero dolor voluptas sit. Eaque nam ipsum et.
Beatae aperiam neque inventore eius laudantium saepe expedita. Illum ad sunt at veniam aut illo. Sed provident accusantium vitae illum. Quis quia exercitationem dolorem tempora. Dolor quo explicabo id dolores. Veniam eum eveniet harum enim assumenda voluptatum. Praesentium qui aut modi.
Consequatur voluptatem molestias eaque itaque molestiae doloremque quia. Nemo doloribus sunt nesciunt dolore velit officia nobis. Aspernatur nobis doloremque et exercitationem voluptas.
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