This paper circulates around the core theme of Explain the relationship observed between ratings and yield to maturity. Explain why the coupon rate and the yield to maturity determine why the bonds would trade at a discount, premium, or par. together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
To fill out the first table, you will need to select 3 bonds with
maturities between 10 and 20 years with bond ratings of “A to AAA,” “B
to BBB” and “C to CCC” (you may want to use bond screener at the Web
site linked above). All of these bonds will have these values (future
values) of $1,000. You will need to use a coupon rate of the bond times
the face value to calculate the annual coupon payment. You should
subtract the maturity date from the current year to determine the time
to maturity. The Web site should provide you with the yield to maturity
and the current quote for the bond. (Be sure to multiply the bond quote
by 10 to get the current market value.) You will then need to indicate
whether the bond is currently trading at a discount, premium, or par.
Bond
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Company/ Rating
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Face Value (FV)
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Coupon Rate
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Annual Payment (PMT)
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Time-to Maturity (NPER)
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Yield-to-Maturity (RATE)
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Market Value (Quote)
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Discount, Premium, Par
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A-Rated
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$1,000
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B-Rated
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$1,000
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|
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C-Rated
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$1,000
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- Explain the relationship observed between ratings and yield to maturity.
- Explain why the coupon rate and the yield to maturity determine why the bonds would trade at a discount, premium, or par.
- Based on the material you learn in this Phase, what would you expect
to happen to the yield to maturity and market value of the bonds if the
time to maturity was increased or decreased by 5 years?