Bond Valuation

You can find the most recent bond rating for many companies by logging onto finance.yahoo.com and going to market data, bond, and bond screening.

1) Find the bond rating for five major companies,(Johnson &Johnson--Bond rating: AAA, Toys R US- Bond rating: CCC, Marriott International- Bond rating: BBB, Wal-Mart-Bond rating: AA, Oi S.A- Bond rating: DDD) which different bond rating, such as AAA, A, BBB, CCC, and DDD by clicking on the following website http://screener.finance.yahoo.com/bonds.html

The criteria are bonds issued by corporations, 30-years to maturity bonds, and Fitch rating ranging from lowest D to highest AAA.

2) Calculate annual coupon payment of each bond that investor expect to receive?

3) Calculate the price of each bond that investors expect to pay?

4) What can you conclude regarding the relationship between bonds rating and the rate of the return bondholders will receive if they hold the bonds until the maturity date (YTM)?

Use the same template in Assignment#2_ bond valuation as an example.

5) Now, find one more 5-year bond that has the same feature as one of your 30-years bond, ie, same rating and same coupon rate. Calculate the new price of bond at the new YTM of 2%, 4%, 6%, 8%, and 10% for both 5-years bond and 30-years bond. Plot the graph of the relationship between the price and YTM for each bond on the same graph. What did you find regarding the relationship between price and YTM for shorter and longer maturity bond? Which bond has a higher sensitive to the change in the price when the yield change?

	Price@2%	Price@4%	Price@6%	Price@8%	Price@10%
5-year bond
30-year bond