Determine the yield-to-maturity based on quarterly periods

Assignment Help Corporate Finance
Reference no: EM13859192



1.Briefly discuss the general characteristics of the bond touching on:

a.A brief description of the company that issued the bond.

b.A brief description of the bond issue; such as the original life of the bond, life remaining, coupon rate, if the bond is callable, current rating, current yield, etc.

2. A brief discussion of why you selected this bond to analyze, emphasizing how your investment objectives and/or your business interests have resulted in this selection.


1. Corporation's Ability to Repay Principal - This entails the identification or calculation of key financial ratios for both their current financial data and historical values.

a. Identify these key ratios based on our text and lecture. (NOTE: These can be selected, in certain instances it might be necessary to calculate the financial ratio based on financial data provided in financial statements in the database, from the Standard & Poor's - Net Advantage and MORNINGSTAR in the ALADIN databases, you might find the company reports in Value Line useful, this is also in the ALADIN databases..)

(Note: You might also find useful the key financial statements and financial ratios that are available on the Internet at Yahoo's web site, )

b.Compare these results to industry standards available from published sources or preferably compare to the industry leader (sales/revenue) [or number two (sales/revenue) in the industry if you are analyzing the industry leader] based on financial ratios from the ALADIN databases, et. al.

c.In addition, include an evaluation of the company's ratios, from B.1.a, over time, what is commonly referred to as trend analysis.

2.Corporation's Ability to Pay Interest - Same procedure as in 1 above.

Note: As per our class discussion, Standard & Poor's Bond Guide, (both hard copy and in their database) provides information about an interest coverage ratio, and calculates this value over several years.

3.Credit Position of the Company

a.Discuss the debt-paying experience of the company. (Use the information about this company's current and historic bond ratings.)

b.Has the company ever defaulted?

c.What is the character of the issuing corporation?


1.Determine the Yield-To-Maturity (YTM) based on quarterly periods (March, June, September, December) for the past nineteen periods. (March 2011 through September 2015). [If September 2015 is not available, use data through June 2015.]

2.Look-up Bond Yield Averages for the corresponding nineteen quarterly periods (available in either Standard & Poor's Bond Guide or MERGENT's Bond Record as per handout example) by the same bond rating classification. (Note: These publications are in the Marymount University Ballston Library.)

3.Utilizing EXCEL, (this is also available at our Computer Lab) complete the following statistical analysis: (Note: The best and most succinct discussion on using and interpreting EXCEL is the statistics text STATISTICS for BUSINESS and ECONOMICS, authored by Anderson, Sweeney, Williams, 2012, SOUTH-WESTERN CENGAGE Learning. ISBN 13: 978-0-538-48165-6)

a.Enter the two sets of data.

b.Evaluate your data by using EXCEL to compute:




Note: Make certain that the regression coefficients (a and b in the equation y = a + bx) in C.3.b.2) and C.3.b.3) are equal, frequently errors are made in these EXCEL applications which result in switching the dependent variable and independent variable.

4.Analyze the output for both sets of data, be certain to evaluate and discuss the statistical significance of the slope (b in the equation y = a + bx) and the coefficient of determination (r2). Use a 10% (.10) level of significance for each variable. (Include all statistical computer output in your report.)

5.Calculate and interpret, for your bond, the current and modified duration. (Include the spreadsheet output in your report.)


Read the definition of the rating given to the bond you are analyzing and compare it to your findings in A - C with the objective of determining if the bond rating is accurate.

Be certain to draw on the information you have presented in B. for this section of the paper.


1.Utilizing citable resources present succinctly (one or two paragraphs is sufficient) "your" outlook for interest rate levels over the next 12 months. (I am not looking for a month-to-month forecast rather I am interested in the trend for interest rates and levels at the end of one year+ [December 2016] for the type [i.e., bond rating, years remaining until maturity] of instrument you are evaluating.)

2.Let me emphasize that I am not requiring you personally to forecast interest rates. Likewise, I am not telling you that you cannot should you so desire, but rather to extract from topical information in current periodicals, web sites, and other media sources what the "experts" are forecasting. (Please be certain to properly footnote these sources.)

3.A starting point is to calculate the difference between the most recent YTM on your risk class of bond, based on the bond rating reference listed in MERGENT's market averages, and the risk free rate on a treasury security (bond, note, or treasury bill) of a similar term to maturity. Take this marginal difference and apply it to the forecast for treasury security rates, in one year, as an estimate for interest rates on your risk class of bond. (For example, if the bond you are evaluating is an A Rated Bond and it has 20 years remaining until it matures then the ?i= YTMMARKET A RATED BOND AUGUST 2015 -YTMRISK FREE LT GOVERNMENT BOND AUGUST 2015)

The reason you are relating the forecast to federal government risk free securities, is that these risk free securities are the instruments you are most likely to find forecasted information about in topical publications, TV reports and web sites, for one year from now in 2016.

4.Calculate the Price for the bond, given your forecasted interest rate change, utilizing, from C.5, information for the modified duration.

5.If the results of your regression are statistically significant, C.3.b.3), use the equation along with an estimate for the independent variable, E.1, to forecast the YTM one year from now for your corporate bond. Interpret the results, do they make sense? Why?


Based on all your information in sections A - E, would you buy this bond? Briefly discuss why or why not.


1.The typed length of this paper (exclusive of any computer printouts and other exhibits which you feel are necessary) is 3-6 pages. SUBMIT ALL COMPUTER OUTPUT. Label each section according to the assignment outline (i.e., A.1.a., A.1.b.)

2.It is important that you footnote the sources of information that would not be obvious to the reader, you can though, be general about the footnote format. But remember when in doubt FOOTNOTE!

3. Use the Corporate Bond Criteria Assignment #1 handout to guide you in your bond selection.

4.The requirements that I have set forth for this assignment may be altered where you feel it is necessary to allow you to complete the assignment, but be certain to footnote what is being changed and why this was necessary.

5.Please feel free to do any other type of analysis that you feel would be important to do in order to make an investment decision concerning the purchase of this bond in question.

6. If two (2) of you are jointly working on this project, you need to include a addendum that identifies what areas each of you worked on for this research paper.

Reference no: EM13859192

Previous Q& A

  Apply the material learned in the course

Apply the material learned in the course

  Prepare a mulit step income statement

Prepare a single step income statement and prepare a mulit step income statement - Did HLP achieve this goal? Show your calculations.

  Draw a cmos circuit for an s-r flip-flop

Explain the basic operation of a CMOS transmission gate and compare it to a tri-state buffer. There is one important difference, make sure to explicitly discuss that difference.

  Question regarding the enterprising oldies

"A LAZY bastard living in a suit" is Leonard Cohen's description of himself in his new album, "Old Ideas". Mr Cohen is certainly fond of wearing a suit, on and off stage. But lazy seems a bit harsh. He is 77, which is 12 years beyond the normal re..

  Create to reflect a classroom management system?

create to reflect a classroom management system?

  Create a curfew for senior citizens drives

Create a curfew for senior citizens drives similar to drivers under 18 years of age in certain states.

  What feelings or emotions were evoked in yoy

After watching one of the the online videos, answer the following questions- Which video did you watch? Click here to enter text. What feelings or emotions were evoked in you? What reactions did you notice in yourself? Click here to enter text

  Successful international growth

Present two alternatives for how the company may be structured after ten years of successful international growth. Nominate one of these as your preferred option and justify. What relationships could it form within its industry and with other stak..

  Compute the financial data for given year

Express each years income statement in common-size percentages and compute the following financial data and ratios for year.

  Calculate the proposed projects internal rate of return

Calculate the proposed project's internal rate of return (IRR). Explain the rationale for using the IRR to evaluate capital investment projects. Could the IRR for this project be different for SRC than for another customer?


Write a Review


Similar Q& A

  Rates to nominal vs. effective rates

Interest rates are a prominent topic nowadays. We should all be familiar with the impact that interest rate fluctuations can have on the economy, in finance, and our daily lives. However, when we are quoted a rate, is the quote the APR or the E..

  What is bond rating

What is bond rating and what is the current price of these bonds if required rate is 12 per cent per annum?

  Write a memo to management

explain the relevance of the matching method in making decision - Write a memo to management

  What is the companys average accounts receivable

If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 7.7 while maintaining the same level of sales, how much cash will be freed up - What is the companys average accounts receivable? Rou..

  Whats the present value and future value

What's the future value of $1,200 after 5 years if the appropriate interest rate is 6%, compounded monthly and whats the present value of $1,525 discounted back 5 years if the appropriate interest rate is 6%, compounded monthly?

  Determine how much life insurance you should carry

Determine how much life insurance you should carry - Was her friend correct? Show your computations. Then determine which policy would have cost Sarah less and by how much.

  Lang industrial systems company lisc is trying to decide

lang industrial systems company lisc is trying to decide between two different conveyor belt systems. system a costs

  Each organization listed has grown significantly over the

each organization listed has grown significantly over the past 5 years. as a result of the growth the organization has

  Relationship between risk and expected return

What is the relationship between risk and expected return and simply mean would you risk money on something with a potential high return when it also meant you might lose all the investment?

  Calculating expected return and standard deviation

You are planning the three securities listed below. Determine the expected return for each security and also find the standard deviation of returns for each security.

  How the knowledge of corporate finance helps a

how the knowledge of corporate finance helps a multinational company to take decision about mergers and

  Identifying missing figures and preparation of balance sheet

Identifying missing figures and preparation of Balance Sheet and Complete the balance sheet below, based on the given data

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd