Treasury securities (USTS), AA-rated corporate bonds, and BBB-rated corporate bonds. Use the dropdown menus to label each security's profile correctly: YIELD 1%) "Ou pols 0 5 10 15 20 25 30 YEARS TO MATURITY troductory Is the default spread between the corporate bonds and the Treasury securities greater for shorter or longer maturities? Short-term maturities Long-term maturities L o hace r understanding of interest rate risk and rainwystment rate is 1 salu Their Valuation 9. More on types of bonds You can distinguish the various types of bonds by their terms of contract, pledge of collateral, and so on. Identify the type of bond based on each description given in the table that follows: Type of Bond Description These bonds are not baded by any physical collateral. They are backed by the reputation and creditworthiness of the issuing company. These bends are backed by real estate holdings and equipment, and a company goes bankrupt, the collateral can be sold off to compensate for the default. These bonds, more so than other collateralized securities have prior claims over These bonds have a claim on assets only after senior det has been paid in full Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is true? 888 bonds all have the lowest vields in the bond markets U.S. government bonds usually have the lowest yields in the bond markets. In 2005, the United States began to witness one of the worst recessions since the 1930s. The case of the housing butible in 2006 led to a massive decline in real estate prices,fecting consumers and institutions, especially banking and financial entities. Severe liquidity shortfalls in the United States as well as the balma s ed to a s us creditoris. During the credit crisis of 2008-2009, several banks and other businesses went through a reorganization processor were forced to date and the example Assignment 07- Bonds and Their Valuation These bonds have a claim on assets only after senior debt has been paid in full. Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is true? BBB bonds usually have the lowest yields in the bond markets. U.S. government bonds usually have the lowest yields in the bond markets. In 2008, the United States began to witness one of the worst recessions since the 1930s. The collapse of the housing bubble in 2006 led to a massive decline in real estate prices, affecting consumers and Institutions, especially banking and financial entities. Severe liquidity shortfalls in the United States as well as other global markets led to a serious credit crisis. During the credit crisis of 2008-2009, several banks and other businesses went through a reorganization process or were forced to liquidate. Consider the following example: In May 2009, General Motors started closing 2.600 of its retail outlets and finally filled for bankruptcy in June. It emerged from the bankruptcy protection by July 2009, after it received funding from the U.S. government, the Canadian government, United Automobile Workers Union, and GM bondholders. story Source: Fartan, Barbara "General Motors Chapter 11 Bankruptcy Overview and Details About.com, Retal Industry. About.com, n. web. August 31, 2010. http:/ industry about.com/ american history chapter 11 bankruptcy details This is an example of: Reorganization Liquidation