Forgot Password?

Investments – Bond Analysis And Trading Project

• For this assignment, you will be analyzing a U.S. Treasury coupon bond and purchasing it on Stock-Trak.
• Stock Trak trades only a very limited number of bonds. To trade bonds, you click on “Bonds” under “Trading” on the lower left of the screen. In the trading window, under “Symbol”, you will find a selection of traded bonds. Treasuries are listed below the Corporates.
• You will select a Treasury bond based on the following formula: Bond Maturity Year = 2020 + (last digit of your student ID number). Select the Treasury bond that has a maturity closest to the formula result.
• Once you have selected your Treasury bond, you must calculate or estimate the following:
1. Estimate the YTM of the bond by linear interpolation of the current Treasury yield curve. http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml

2. Calculate the current bond Present Value (or Price). (You can use either your financial calculator, or Excel’s PV function, or Excel’s PRICE function. You may have to install all of the “Add-ins” on Excel to get the PRICE function to work. Look under “Tools” and then “Add-ins”.)

3. Calculate the bond’s Macaulay Duration. (You can use the formula in the book or Excel’s DURATION function. This will also require the “Add-ins”.)

4. Calculate how many bonds you need to purchase in order make a $50,000 purchase. Round off to the closest whole number.

• Next, go buy your selected bond in the quantity that you calculated in part 4 above.

What to turn in:

(1) Calculations and circled answers for parts 1 through 4.

(2) Confirmation page or Transaction History that shows the bond purchase in the appropriate quantity.

Comments are closed.