Due Date: 11:59 pm EST Sunday of Unit 7
Points: 100
Overview:
In this assignment, you will apply the principles used in calculating the price of a bond.
Instructions:
The yield of the 10-year US Treasury bond is 1.20%. It is the risk-free rate. You work for an investment manager and your boss asks you to calculate the price of a 10-year corporate bond that yields 3.00% more than its risk-free rate and has a face value of $1,000. The fixed coupon of this corporate bond is 5.00%. Both bonds pay coupons annually.
• What is the current price of the corporate bond?
• Calculate the price of the bond if its yield increased by 1.00%.
•
Calculate the price of the bond if its yield decreased by 1.00%.
• Please discuss the risk associated with this change in interest rates?
Requirements:
• Submit a Word document or Excel spreadsheet.
• At least three pages in length, excluding the Title and Reference pages.
Be sure to read the criteria below by which your work will be evaluated before you write and again after you write.
© 2022 Post University, Waterbury, CT ALL RIGHTS RESERVED
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CRITERIA |
Deficient |
Needs |
Proficient |
Exemplary |
|
|
0 – 11 points |
12 – 15 points |
16 – 19 points |
20 points |
|
Current price of a corporate bond |
The bond’s current price calculations are missing or
|
The bond’s current price is calculated but is |
The bond price is calculated but is missing minor |
The bond’s current price is accurate and is |
|
Cost if yield increases by 1.00% |
The bond’s price calculations are missing or
|
The bond’s price is calculated but |
The bond’s price is calculated but |
The bond’s price is accurate and is |
|
Cost if yield decreases by 1.00% |
The bond’s price calculations are missing or incorrect.
|
The bond’s price is calculated but |
The bond’s price is calculated but |
The bond’s price is accurate and is |
|
Discussion on risk and interest rates in bonds |
The discussion on risk and interest
|
A discussion on risk and interest |
A discussion on risk and interest rates is present |
The discussion on risk and interest rates is |
|
|
0 – 5 points |
6 – 7 points |
8 – 9 points |
10 points |
|
Paper Length |
Less than 3 pages
|
n/a |
n/a |
3 pages or more. |
|
Clear and Professional Writing and APA Format |
Errors impede |
Significant errors that |
Few errors that do not |
Writing and format
|
© 2022 Post University, Waterbury, CT ALL RIGHTS RESERVED
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