Part 1: Bond Performance Analysis and Interest Rate Trends (40% of the project grade) Based on the course material presented in Week 3
The information on bonds can be found on the Bond section of the FINRA Market Data Center. To find the information on bonds, click on Search tab in the middle of the screen (under Market Center Bond Guide). Under Quick Search, complete 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 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 quotations of five to eight corporate bonds that contain a price under “Last Sale” and Ratings of Moody’s and Standard & Poor’s (S&P) 500. Not all companies list their bonds on this website. You can use bonds from the same company or choose different companies. Choose the bonds with different maturities, different coupon payments, and so on. Be creative!
1. To grade your project your professor needs to see the information on the bonds you chose. Copy the bonds quotations into your project.
2. What were the last prices of the bonds (from the Last Sale column)? What does this price mean?
3. Assume the par value of the bond is $1,000.
a. How much will an investor pay for a bond purchased at the price listed in the
Last Sale column?
b. Calculate the annual coupon interest payments.
Show your work in your project.
4. The YTM is listed in quotations of the bonds (in the Last Sale column, Yield). What
does it mean? (No calculations are required for this section.)
5. 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 in interest rates affect the bonds’ prices?
6. Using the forecast of interest rates (short-term and long-term) that you found in
Stage 1 of the project, create a forecast of the bonds’ prices. Explain your results.
7. Write at least two pages of analysis of the bonds. Answer the following questions, explaining each answer.
a. If you are going to buy a bond, which bond would you choose? Why?
b. What connections are there among economic trends analysis, bond market
performance, and investment decisions? Discuss these connections.
c. Look at the balance sheet and income statement of the companies. What
data or ratios support your decision to buy this bond or not?
Part 2: Stock Market Indexes (40% of the project grade)
Based on the course material presented in Week 5
In this part of the project, we will investigate three stock market indexes: S&P 500, Dow Jones Industrial Average (DJIA), and the NASDAQ Composite.
From the Yahoo! Finance home page:
• Click on “S&P 500” on the front page. The original graph shows the index for the current business day.
• Change the view to the full screen, then change the view to two years (2Y).
• Using the +Comparison button above the graph, add DOW and NASDAQ to the
graph to show the percentage change for each day relative to the first day (2 years ago) and the level of each index.
Write a report (minimum two pages, double-spaced) analyzing the results you received. At a minimum, respond to all of the following:
• What type of indexes are the S&P 500, DJIA, and NASDAQ Composite?
• What factors influence the performance of these indexes?
• Is there a difference between the performances of S&P 500, DJIA, and NASDAQ
Composite over these two years? If so, explain the factors that contribute to those
differences.
• Using the forecast of economic conditions and trends you found in Stage 1 of the
project, what tendency of the levels and percentage changes of these indexes do
you expect in the short term and in the long term?
• Will these findings change your decision to buy the bond you chose in Stage 1 of
this project, versus investing in stock market or in both? Explain your answer.
Part 3: Reflection (5% of the project grade)
Write a paragraph in your own words reflecting on what you learned from the assignment and how you think you could apply what you learned in the workplace or in your everyday life.
