Bonds

Week Two Written Homework Assignment

Christopher Snyder

Upper Iowa University

Bonds

I found that the prices of coupon strips were 99.955 for a bid and they were asking 99.960 for the strip. The expected one year interest rate in three years was 4.69%. I found that the four year bond strips were very close to that of the package I constructed. It was 1.14% off of what it should be. I found that the Treasury bond has quite a longer duration than that of the regular bond I found. I found that TIPS should provide a higher real rate of return for this investment scenario.

The price range for Johnson and Johnson varies from $100 all the way up to $137. It appears that in Johnson and Johnson’s case as the callable bonds are taken out the yield percentage of those bonds goes up. Walmart bonds start at $108 and go all the way up to $138 for bonds. This again appears that the bonds that are not callable have a higher yield to maturity than those bond prices that do not have a similar yield. Disney bonds start at around $99.99 and go up to $108. Only one of the bonds found was callable. They yield to maturity was much lower than the other two bonds that were have looked at. SunTrust Banks bonds start at $83.30 and go up to $110. The callable bonds still have a lower yield to maturity. US Steel bonds start at $89.50 and go up to $105.60. The research shows that there are not many callable options for US Steel. It would be assumed that the callable options would be lower than the non-callable yields.

Visiting the Wall Street Journal website was eye opening because of all the information available for people to consumer. There were several things that were learned in these visits. First there are numerous tabs to bonds, ETFS, and stocks that certainly would help a person discover information that they would be looking for. There is an article entitled Investors Continue to scoop up Tips which was quite interesting. The article states that the inflation...