Corporate Bonds

What this video covers

• Why corporate bond interest is fully taxable at federal, state, and local levels, and how the exam uses this as a trap against municipal bond exemptions
• The liquidation priority order from secured bondholders through common stockholders, and why each step down demands higher yield
• Why debentures are unsecured and what subordinated means for payment priority in bankruptcy
• Phantom income taxation on zero-coupon bonds, and why the IRS taxes annual accretion before any cash is received
• Why zero-coupon bonds carry the highest interest rate risk among coupon-bearing alternatives
• How to calculate conversion ratio from par value and conversion price, and why convertible bonds offer lower coupon rates
• Why high-yield and junk bonds are the same category, and what below investment grade implies for default risk and coupon size