We looked at how interest rates impact bond valuation. The following questions are designed to help you understand how bond values are affected by different interest rate levels. Here, we will access the website finra-markets.morningstar.com/Bond Center/to answer these questions:

1. Once you’ve accessed the Bond Center screen, click on the search tab in the middle of your screen. Do a quick search for Alphabet bonds. Remember that Alphabet is the parent company of Google. What are the bonds rated by S&P? By Moody’s? What is the longest maturity of an issue displaying on the screen? What is this issue’s price and yield? Is this issue selling at par, discount, or premium? What have interest rates done since the bond was issued? (Hint: Look at the bond’s coupon rate relative to its yield to maturity.)

2. Now, run an advanced search by going back to the main Bond Center screen. Click on the search tab in the middle of your screen, and click on “Show” (next to “Advanced Search”). Search for an Industrial, Senior, Nonconvertible, Corporate Bond. Select all debt instrument types. The bond should have fixed, semiannual coupons—but don’t specify the coupon rate. Finally, don’t specify a bond rating. Now, select “Show Results”.

Briefly explain how the yields to maturity of the bonds vary according to bond rating.

3. Identify the lowest-rated bond shown in your search. What is its bond rating? What are its current price and yield to maturity? When does it mature?

4. Now, select a different bond from your search. What is the bond rating by Moody’s? By S&P? Is the bond an investment-grade bond? Explain.

5. Using the same bond selected for question 4, note the bond’s coupon rate, maturity, current price, and yield to maturity. Based on this information, has the bond’s yield to maturity increased, decreased, or stayed the same since it was issued? Is the bond currently selling at par, discount, or premium?