business HW

BUS-121 Spring 2017 Bond Investments Name:

Instructor: Frank Caperino Assignment Sheet Please show all your work!

1) Go to FINRA (see chapter 11 section of class web site) and find corporate bond quotes for Chevron. For any of the Chevron bonds you find, please report the Price, Coupon rate, Maturity date, Yield rate, and Moody or S&P or Fitch

rating. (Note: If there is any other company that you want to research, please do so. Be sure to choose Corporate.)

2) You purchased a $1,000 corporate bond earning 6% three years ago. The interest rate on comparable bonds is now

3%. Can you sell your bond for the same price, a higher price or a lower price? Please explain why!

3) Your $1,000 bond from question #2 is paying you 6%. How much interest do you receive each year?

4) A married couple from California is in the 31% Federal tax bracket and the 10% California tax bracket. They are

considering a 5½% Arizona municipal bond (Federal tax-free), a 5% California bond (double tax-free) or a 7½%

corporate bond (fully-taxable). Which bond offers the highest after-tax interest rate? (Please show 2 or 3 digits.)

5) A bond with a par value (a.k.a. face value) of $1,000 that pays 8% is currently priced at $1,100. What is the nominal

interest rate? Calculate the current yield.

6) The 8% bond from question #5 that is selling for $1,100 has a maturity of 10 years. Calculate its yield-to-maturity.

7) You are researching two bonds. The first bond is rated AA and is paying 5%. The second bond is rated BB and is

paying 7%. Which bond would you choose? Explain why you made your choice. (Either choice is correct; make sure

you explain why you chose the one you did.) What is one of the three names for bonds that are rated less than BBB?