13.1 Chapter Thirteen: Learning Outcomes

In this chapter you will:

• Distinguish between the return on an investment and the firm’s Cost of Capital. 
• Define various qualitative bond risks. 
• Contrast Price or Interest Rate Risk versus Reinvestment Rate Risk. 
• Compare Investment Grade to High-Yield Bonds, and their different Credit Ratings. 
• Discuss Liquidity Preference Theory and its impact on the slope of the Yield Curve.
• Define each of four Yield Curve Theories.  
• Calculate the Spot Curve. 
• Explore Credit Spreads 
• Consider the Macroeconomic circumstance under which Credit Spreads will narrow and widen. 
• Utilize Credit Spreads in a predictive manner.