Debt Yields and Pricing: Rapid Fire
Chapters in this video
- 0:00 The price-yield seesaw and the par magnet
- 2:13 Ranking the four yields: discount then reverse for premium
- 3:25 Volatility, call features, and YTC versus YTM quoting
- 4:25 Day counts and the government 32nds quote trap
- 5:49 Taxes: OID phantom income, market discount, and amortization rules
- 7:03 Rapid-fire exam recap
What this video covers
- Why nominal yield never changes after issuance, and how the price-yield seesaw really works on exam day
- How to rank the four yields for discount bonds (YTC, YTM, CY, nominal) and why the order flips entirely for premium bonds
- When a callable bond is quoted on a yield to call (YTC) basis versus a yield to maturity (YTM) basis, and what that implies about the issuer
- Which bond is the most volatile (longest maturity plus lowest coupon), and why a 30-year zero-coupon bond swings hardest
- The corporate and municipal 30/360 day count versus the government actual/actual method, and why the wrong method produces a plausible wrong answer
- How government bonds quote in 32nds (99-16 means $995, not $99.16), and when bonds trade flat (default, income bonds, zero-coupon)
- Original Issue Discount (OID) phantom income taxation, market discount treatment at maturity, and the elective-versus-mandatory premium amortization split between taxable corporates and municipals
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