BUS 342 GFF 7.7

Boom Boom Comes to Colleges - Universities issued a lot of debt - Colleges were good with credit and were a win-win with the creditors/sh and college - Universities would issue debt at a low rate instead of endowment funds Deluge of Debt Tied to Carbon Emissions and Diversity - Companies' issues tied to ESG initiative - 2 million reward companies for lower or penalized companies for emissions and diversity in their company with coupon rates - 2 million initiatives if the company follows through - The investors with mutual funds are what determines Term Structure of Interest Rates - Term structure - relationship between time to maturity and yields - all else equal - Yield curve - graphical rep of the term structure - Normal - upward sloping - Inverting - downward sloping - Yields are made of many variables - Interest rate premium In the short run — interest rates would come down for it to not come down to a recession Treasury Yield Curve - Short-run that rates are shown high - Most likely are doing to come down over time - Important to corp finance — company decides price for bonds - Shows that the yield are tied to the time Factors Effecting Required Return - Default risk premium - bond ratings - Taxability premium - muni vs taxable - Liquidity premium - bonds that have more frequent trading wil generally have lower required returns - Maturity premium - longer-term bonds will tend to have higher required returns
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