Corporate Structure/bonds

Question 1

Characteristics of REITS

Answer 1

at least 90% of taxable income must be distributed to shareholders annually

Question 2

Forward triangular merger

Answer 2

acquirer combines target with a preexisting subsidiary. if at least 50% stock, selling shareholders are only taxed on cash portion

Question 3

Reverse triangular merger

Answer 3

subsidiary is subsumed in target co. Target survives. if at least 80% paid in stock, selling shareholders only taxed on cash portion.

Question 4

YTM Calculation for premium bond

Answer 4

Question 5

YTM Calculation for discount bond

Answer 5

Question 6

Duration

Answer 6

sensitivity of bond price to change in interest rates. long term bonds have a higher duration than short term bonds. low coupon bonds have a higher duration than high coupon bonds

Question 7

Convexity

Answer 7

second derivative of how bond price varies with interest rates.

Question 8

Guaranteed Bond

Answer 8

A debt security that offers a secondary guarantee that interest and principal payment will be made by a third party, should the issuer default due to reasons such as insolvency or bankruptcy. A guaranteed bond can be municipal or corporate, backed by a bond insurer, a fund or group entity, or a government authority.

backed by a corporation other than the issuer, e.g. Parent company guarnteeing bonds of a subsidiary

Question 9

Underwriting spread

Answer 9

selling concession + underwrting fee = full/total takedown

note: Koppelman defines underwriting fee as takedown

total takedown + managers fee = spread