Learning Outcome Statements

1. Credit Risk

a. describe credit risk and credit-related risks affecting corporate bonds;

b. describe default probability and loss severity as components of credit risk;

2. Seniority Ranking and Priority of Claims

c. describe seniority rankings of corporate debt and explain the potential violation of the priority of claims in a bankruptcy proceeding;

3. Credit Ratings

d. distinguish between corporate issuer credit ratings and issue credit ratings and describe the rating agency practice of "notching";

e. explain risks in relying on ratings from credit rating agencies;

4. Credit Analysis

f. explain the four Cs (Capacity, Collateral, Covenants, and Character) of traditional credit analysis;

g. calculate and interpret financial ratios used in credit analysis;

h. evaluate the credit quality of a corporate bond issuer and a bond of that issuer, given key financial ratios of the issuer and the industry;

5. Credit Risk vs. Return: Yields and Spreads

i. describe factors that influence the level and volatility of yield spreads;

6. Special Considerations of High-Yield, Sovereign, and Municipal Analysis

j. explain special considerations when evaluating the credit of high yield, sovereign, and municipal debt issuers and issues.