The Risk of Corporate Bond Market

1. "Bonds 200." Why Companies Issue Callable Bonds. N.p., 24 Sept. 2014. Web. 30 Sept. 2014.

1. How are Mortensen’s estimates of Midland’s cost of capital used? How, if at all, should these anticipated uses affect the calculations?

The major challenge of any bond issue is the uncertainty, i.e. the fact that companies cannot predict how markets will react to the issue. Moreover, the volatility of the fixed income markets is a factor to be accounted for as well as how the credit risk rating of the Company will be perceived and accepted by the investors. Another major uncertainty is the bid-to-ask ratio. A potential major uncertainty, which is not present in the case of WorldCom but presently has become an uncertainty in some markets, is the country risk premium. If the operations are in a country that has a non-stable political or sovereign state the volatility of the country risk premium could be a major uncertainty that an issuer could face.

Kacperczyk & Scnabl trace the financial crisis of 2007 2009 via commercial paper. They describe the important role commercial paper played during the financial crisis. The working definition for commercial paper with respect to finances used in this article is as follows:

The other kind of risk factor the company could come across is interest rate risk. Because interest can either increase or decrease there is a probability that AirJet Best Part’s bonds could lose its value over time, depending on how long they have the bond. The longer

Security of information is crucial in any organization regardless of the activities it undertakes. As such, in the event you are developing a project, key interest has to be taken concerning the threats or risks likely to take place. It is imperative to handle either tangible or intangible issues associated to security. For GFI to regain its reputation, it is important to comprehend the security issues that should be handled. The report will describe various security efforts aimed at making GFI more secure.

| The hypothesis that market prices reflect all publicly available information is called efficiency in the:Answer

Some positive covenants AirJet could use in future bond issues is maintain a minimum level of net working capital, maintain any and all collateral or security related to the bond indenture as well as all facilities in good working condition. They also must file quarterly audited financial statements and make sure bondholders have access to this information. They must maintain a certain level of debt coverage ratio as well as allow for redemption in the event of a merger or sale.

Now would be the best time to make an investment in Southwest Airlines, since they are coming out of the financial depression that all airlines went into during 2009 to 2013. Since the biggining of 2013(1/2/13), Southwest’s stock has climbed from a low of $10.47 to a high of $33.57 on 9/30/14. This shows that Southwest Airlines is indeed comiing out of the depression.

It has been established that it is crucial to be able to properly value a bond for finance. Two companies have been chosen to represent this action for this document Apple Inc. as well as IBM which are both in the technology sector and have long term debt, have bonds and also stocks available for sale. We are going to determine the length until maturity, the yield to maturity and then also the price of the bond today. While keeping this information in mind we can determine what time value of money illustrates about each bond. A credit rating has been assigned to each company and we can determine which company may be the better investment for the bank as well as the investor. In the

During the recent financial crisis, a number of banks were bailed out with public funds because they were considered "too big to fail". The level of state support was unprecedented1. While this may have been necessary to prevent widespread disruption to the financial markets and real economy, it is clearly undesirable for taxpayers' money to be used in this way at the expense of other public objectives. In the future, the financial system must be more stable and banks must be permitted to fail in an orderly manner, so that government bail-outs are not needed.

GFI Risk Assessment Celida M. Bruss CMIT 425 8 July, 2015 Executive Summary The following risk analysis of Global Finance Incorporated (Inc.) addresses the weaknesses discovered not only in the physical and logical infrastructure, but in the corporate climate that dictates security and technology operations for GFI Inc. GFI leadership must compromise on how to manage its assets by dividing what it can among internal IT staff and outsourcing less critical functions to a commercial cloud provider. Additional findings from the Risk Analysis reinforce the need for a new and updated architecture.

Business Risk is an uncertainty that is affiliated with a particular circumstance that could affect business operation or cause financial insecurities for the company. Business risk assessment is the process of determining whether a particular uncertain circumstance has the potential to threaten your business operations (Schwartz and Chandler, 2012). In the competitive market, it is important that businesses assess the risk regularly and respond with a sound reaction to be successful. Small businesses may not afford to determine the risks with a complicated statistical method, but proper use of Accounting Information System provides enough information to find out potential threats. This research discusses the methods of applying accounting information to assess the business risk. With the discussions of available research papers, it proposes better ways small businesses can determine the business risks and respond to it using the accounting information system. Taking precautions and paying attention to few procedures might reduce the risks significantly. From the research, it is concluded that small business owners can reduce likelihood of hazards, misappropriation of assets, frauds, misuse of information, and the marketing risk for a low cost. To achieve the goal, a checklist needs to be followed ensuring the proper segregation of duties, restricted access with secure server, frequent inventory and assets count, communication with customers, and employee training.

From the calculations above we see that the risky nature of the company attracts high interest rates that result in lower net cash flows. If it was a stable business it would be paying a weighted cost of capital around 0.08% and this would save the shareholders over $30,000. On the other hand, it should strive to maintain its weighted cost of capital at 0.12, a higher weighted cost of 14% will see it loose over $13,000 in discounted cash flows.

After completing the table of bond valuations I noticed some definite trends. Consider the AAA rated bond I chose in my valuation, yielding a 3.13% to maturity. As the remaining two bonds are BB and CCC, both have noticeably high yield to maturity percentages. In my observation, As the bond credit rating decreases, the yield to maturity percentage increases. The higher the yield, the more likely it is that the firm issuing the bond is not of high quality.(High/low yield bonds, 2006)