Ratings, required yields and the Baa–Treasury spread
State that lower ratings carry higher default probabilities and higher yields, record which investors sit at each end of the scale, and define the Baa–Treasury spread (about 1.43 points in mid-September 2026).
2
The spread through history and its two readings
Sketch the spread from about 7.5 points in the 1930s to 1.5–2% by 2005, mark the 1987, 1998 and 2001 widenings, and record both readings of a low spread and their link to 2008.
3
Promised yield, expected yield and the premium stack
Define promised and expected yield to maturity, write the default premium and the risk premium as differences, and draw the stack from the default-free rate up to the promised yield.
4
Securitization and disintermediation
Define disintermediation as borrowers tapping markets directly instead of through banks, list the benefits claimed for securitization, and list its four prerequisites: diversification, accurate risk measurement, normal markets and sophisticated investors.