Part I Deliverable Length: 700-1000 words
Understanding how to properly value a vanilla
bond is essential for finance. Find a company with debt and that pays
dividends. You can use the following stock screener to find a company:http://www.google.com/finance/stockscreener.
Add the criteria of long-term debt to assets to ensure the company has debt.
Add the criteria of dividend per share. Find the company’s financial pages
at:http://www.sec.gov/edgar.shtml. Look at the long-term debt on the balance
sheet. Determine the coupon price, the length until maturity and the yield to
maturity. Calculate today’s price of the bond.
List the pertinent
information on the bond you chose and then Calculate the price of one bond from
Choose another company,
find a bond, list all pertinent information and calculate today’s price.
Which bond is receiving
the better price? Explain your answer.
From a time value of
money frame of mind, what does each rate say about the viewpoint on the time value
What does that tell you
about the credit rating of each company?
Which company has a
better credit rating? Explain your answer.
Based on the credit
rating, which company do you think the bank feels more secure will pay back the
loan? Explain your answer.
Why does the bank charge
more interest for one company than another?
What does the credit
rating say to an investor?
Which bond looks more
attractive from the company’s view point? Explain why you chose the answer you