Bonds Performance Analysis and Interest Rates Trends (40% of the project grade).
Based on the course material presented in week 3.
The information on bonds can be found on the website the Bond section of the FINRA Market Data Center. To find the information on bonds, click on Search in the middle of the screen (under Market Center Bond Guide). Under Quick Search type the Issuer Name and Symbol fields, then click Show Results.
If you cannot find a particular bond on the FINRA site, check the Bonds page on Markets Insider. To find the information on bonds, scroll down the page, type the name of the company in the window under Bond Finder, then click on the magnifying glass.
Find the quotations of five to eight corporate bonds that contain a price under “Last Sale” and Ratings of Moddy’s and Standard & Poor’s (S&P). Not all companies list their bonds on this website. You can use the bonds of the same company or choose different companies. Choose the bonds with different maturities, different coupon payments, and so on. Be creative!
To grade your project your professor needs to see the information on the bonds you chose. Copy the bonds quotations into your project.
What were the last prices of the bonds? What does this price mean?
Assume that par value of the bond is $1,000.
How much will the investor pay for the bond purchased at the price listed in the Last Sale column?
Calculate the annual coupon interest payments.
Show your work in your project.
The YTM is listed in quotations of the bonds . What does it mean?
Calculate the Macaulay duration and modified duration of these bonds. Use an online Duration calculator. Present the results of your calculations in your project. How will changes of interest rates affect the bonds’ prices?
Using the forecast of interest rates that you found in Stage 1 of the project, create the forecast of the bonds’ prices. Explain your results.
Write at least two pages of the analysis of the bonds. Answer the following questions, explaining each answer.
If you are going to buy a bond, which bond would you choose? Why?
What connections are there among economic trends analysis, bond market performance, and investment decisions? Discuss these connections.
Take a look at the balance sheet and income statement of the companies. What data or ratios support your decision to buy this bond or not?
