Characteristics Affecting Valuation

What this video covers

• Why a municipal bond inside a traditional Individual Retirement Account (IRA), Roth IRA, pension plan, or charity is a classic unsuitable recommendation, and why tax shelters do not stack
• How tax-equivalent yield comparisons work, and why the municipal bond exemption applies to interest income only, not capital gains
• The liquidity hierarchy from United States Treasuries down to high-yield corporates, and why less liquid bonds must offer higher yields
• Priority of claims in liquidation: secured bonds, unsecured bonds and debentures, subordinated debt, preferred stock, then common stock
• The call risk cycle when rates drop, why callable bonds hit a price ceiling near the call price, and how negative convexity flattens price appreciation
• Why zero coupon bonds are the only bonds whose duration exactly equals maturity, and why coupon-paying bonds always have duration below maturity
• How coupon versus market yield drives premium, discount, and par pricing, and what pull to par means as maturity approaches