1. CHAPTER THIRTEEN FIXED-INCOME ANALYSIS

2. SAVINGS DEPOSITS n COMMERCIAL BANKS their financial products include various fixed-income securities, such as 3 demand deposits 3 time deposits 3 certificates of deposit

3. SAVINGS DEPOSITS n COMMERCIAL BANKS their financial products include various fixed-income securities, and are 3 usually insured by a federal agency, such as the Federal Deposit Insurance Corporation, know as the FDIC

4. SAVINGS DEPOSITS n OTHER SAVINGS INSTITUTIONS: Savings and Loan Companies Mutual Savings Banks Credit Unions

5. THE MONEY MARKET n DEFINITION: a market for buyers and sellers of short-term (less than one year in maturity) financial products

6. THE MONEY MARKET n MONEY MARKET INSTRUMENTS commercial paper certificates of deposit bankers acceptances eurodollars repurchase agreements (repos)

7. U.S. GOVERNMENT SECURITIES n TYPES OF GOVERNMENT SECURITIES U.S. Treasury Bills 3 issued on a discount basis 3 maturities up to 52 weeks 3 sold by auction (bid process)

8. U.S. GOVERNMENT SECURITIES n TYPES OF GOVERNMENT SECURITIES U.S. Treasury Notes 3 longer term than T-bills 3 from one to ten years 3 semiannual coupon payments 3 current owners are registered 3 issued in denominations of $1000 or more 3 active secondary market

9. U.S. GOVERNMENT SECURITIES n TYPES OF GOVERNMENT SECURITIES U.S. Treasury Bonds 3 maturities greater than ten years 3 denominations in $1,000 or more 3 some have call provisions

10. U.S. GOVERNMENT SECURITIES n TYPES OF GOVERNMENT SECURITIES U.S. Savings Bonds 3 nonmarketble and offered only to individuals 3 Series EE are pure discount bonds 3 Series HH mature in 20 years with semiannual coupon payments

11. U.S. GOVERNMENT SECURITIES n TYPES OF GOVERNMENT SECURITIES Zero Coupon Treasury Security Receipts or Coupon stripping 3 Treasury bonds are purchased and placed in trust with a custodian 3 sets of receipts issued for each coupon date 3 another set of receipts issued for certain maturity dats

12. FEDERAL AGENCY SECURITIES n BONDS OF FEDERAL AGENCIES Department of Defense Export-Import Bank Federal Housing Authority Postal Service Tennessee Valley Authority

13. FEDERAL AGENCY SECURITIES n BONDS OF FEDERALLY SPONSORED AGENCIES Federal Home Loan Bank Federal National Mortgage Association Student Loan Mortgage Corporation Farm Credit Bank Resolution Funding Corporation

14. STATE AND LOCAL GOVERNMENT SECURITIES n ISSUING AGENCIES States Special Districts Municipalities, Counties and Townships

15. STATE AND LOCAL GOVERNMENT SECURITIES n TYPES OF MUNICIPAL BONDS General Obligation Revenue Industrial Development

16. CORPORATE BONDS n TAX TREATMENT How is the income from a bond treated in the tax return of the corporation? 3 discount basis – discount taxed as ordinary income by federal government 3 coupon basis – coupon taxed annually – interest payments by corporation considered expenses to reduce taxable income

17. CORPORATE BONDS n THE INDENTURE DEFININTION: a legal document formally describing the terms of the legal relationship between a bond issuer and bondholders.

18. CORPORATE BONDS n THE INDENTURE The Trustee 3 acts to protect the intersts of bondholders 3 facilitates communications between them and the issuer 3 the indenture promises the trustee that it will comply with a number of stated provisions

19. CORPORATE BONDS n THE INDENTURE includes other terms such as the sale of assets, issuance of other bonds, dividends payment changes, and other issues that may change the profitability and solvency of the issuer

20. CORPORATE BONDS n TYPES OF BONDS mortgage collateral trust equipment obligations debentures income guaranteed

21. CORPORATE BONDS n CALL PROVISIONS the option to pay off the bond at par at any time prior to maturity

22. CORPORATE BONDS n THE INDENTURE Two Kinds of Call Provisions: 3 no calls in first five years or 3 call premium is specified in the provision at time of issue

23. CORPORATE BONDS n SINKING FUNDS requires issuer to make annual payments to a fund the fund pays part of the principal each year trustee may also repurchase bonds in the open market

24. FOREIGN BONDS n WHAT CONSTITUTES A FOREIGN BOND? DEFINITION: foreign bonds are bond offered in another currency outside the issuers country of origin Example: 3 a yankee bond is a foreign bond issued in the U.S. by a Canadian firm denominated in U.S. dollars

25. PREFERRED STOCK n DEFINITION: a hybrid form of security that has characteristics of both common stocks and bonds similar to a perpetual bond receive preferential treatment before common stock in order of dividend payment unpaid dividends usually accumulate some are convertible to common stock

26. END OF CHAPTER 13