-Each Issuer (A, B, and C) has a bond outstanding described in the following table.

Issuer	Annual Coupon	Maturity	Credit Quality	Par	Callable
A	0.000%	October 2 2022	Investment Grade	1000	No
B	0.000%	October 2 2025	Investment Grade	1000	No
C	8.000%	October 2 2022	Investment Grade	1000	No

-Calculate and write down the cash flows for each bond.

-Calculate and write down the discount rates for each bond.

-Calculate the price of each bond. Assume that today is October 2, 2020. Round your answer to 2 decimal points (for example $953.10).

-Calculate the yield to maturity of each bond. Use the RATE function in Excel. Write down the inputs that you use in the RATE function. Round your answer to 3 decimal points (for example, 9.882%).

-Suppose all yields increase by 1% over the next year. Calculate and write down the new yield to maturity for each bond. Round your answer to 3 decimal points.

-Calculate the price of each bond. Assume its now October 2, 2021. Be sure to consider how the timing of the cash flows has changed! Round your answer to 2 decimal points.

-Calculate your holding period return. Write down your cash inflows and cash outflows that make up the profit. Write down your initial investment. Write down the holding period return for each bond. Round your answer to 3 decimal points.

AutoSave Q&= Assignment 4 -correction - Saved to my Mac Home Insert Draw Design Layout References Mailings Review Viere Table Basign Layout Share - Comments Instructions continued -Go to standardandpoors.com. Register for a free account so you can access the data you need. - Under S&P Global Ratings search for the credit rating for Stock A by Entity. Under Issuer Credit Rating, find the Rating Type "Lacal Currency LT" and write down the Rating. -Repeat the above for Stacks and C. - If you can't find a rating for your company, write "R" and assume the spread is the same as BBB. -Rank the credit quality of your three stocks, where 1 is the highest credit quality and 3 is the lowest. If two stocks have the same credit quality, you can denote a tie with the same ranking that is, 1,1,2 or 1,2,2 are acceptable answers). -Each Issuer (A, B, and has a bond outstanding described in the following table. Issuer Annual Coupon A 0.00DX B 0.000% 8.000% Maturity Credit Quality | Par October 2 2022 Investment Grade 1000 October 2 2025 Investment Grade 1000 October 2 2022 Investment Grade 1000 Callable No No NO -Calculate and write down the cash flows for each bond. -Calculate and write down the discount rates for each bond. . -Calculate the price of each band. Assume that today is October 2, 2020. Round your answer to 2 decimal points (for cxample $953.101. - Calculate the yield to maturity of each bond. Use the RATE function in Excel. Write down the inputs that you use in the RATE function. Round your answer to 3 decimal points (for example, 9.882%). -Suppose all yields increase by 1% over the next year. Calculate and write down the new yield to maturity for each bond. Round your answer to 3 decimal points. Calculate the price of each bond. Assume it's now October 2, 2021. Be sure to consider how the timine of the cash flows has changed! Round your answer to 2 decimal points. Calculate your holding poriad return. Write down your cash inflows and cash outflows that make up the grafit. Write down your initial investment. Write down the holding period return for each bond. Round your answer to 3 decimal points Type your answers on the following solutions page. You should perform the necessary calculations in Excel. I have included many intermediate steps in the salutions, so there will be na partial credit. Please format your solutions so that it does not exceed one page. Please save the file as Assienment 4 FirstName LastName (ca. Assignment 4 - Sara Holland.docx). Page 2 of 2 3 of 61 wards DE English United States Focus E = - + 140% AutoSave - BBC= resignment 4-correction - Saved to try Mac Home Insert Draw Design Layout References Mailings Ravi View Share - Comments Investments Project Assignment 4 Instructions Research the current interest rate environment and graph the zero-coupon Treasury yield curve. The yield curve gives the relationship between time to maturity and interest rates. The yield curve is useful for two reasons. It can give us an idea of future interest rates. And we can look at the interest rates for each year and use those rates to discount other cash flows of the same credit quality. Note that U.S. Treasury securities are risk free AAA. Actually, I did this step for you, Zero-Coupon Treasury Yield Curve 0.56 0.45 20.40 0. 0.25 0.20 0.15 0.10 0.06 0.00 1 2 4 5 3 Maturity Years! To use the yield curve to price bonds with more credit risk, you need to know the yield spread. The yield soread is the additional return that bond investors require to hold a bond of worse credit quality. To find the discount rates for bonds with more credit risk, add the yield spread to each discount rate from the zero-coupon Treasury yield curve. Here is some information on yield spreads for Octaber 2020. Note that 100 basis points = 1% Credit Rating Yield Spread 100 bps BBE 200 bps BE 250 bps Psycat 3 551 was TE Engist United States 13 Focus E = - + 140% AutoSave - BBC= Assignment 4 -correction - Saved to my Mac Home Insert Draw Design Layout References Mailings Review Viera Table Design Layout Share - Comments Assignment 4 Solutions A B C Ticker Credit Rating Credit Quality Ranking Spread Cash Flows t- i t-1 t=2 t-3 t- t=4 t=5 Discount Rate t=0 t-1 L=2 t-3 t-4 t=5 Price Yield to Maturity Calculation Neer Pmt PU FV Yield to Maturity ONE YEAR LATER New Yield to Maturity L New Price HPR Calculation Cash inflows Cash Outflows Initial Investment Holding Period Return Page 33 3 of 61 warsis DE English United States) Focus E = - + 140% AutoSave Q&= Assignment 4 -correction - Saved to my Mac Home Insert Draw Design Layout References Mailings Review Viere Table Basign Layout Share - Comments Instructions continued -Go to standardandpoors.com. Register for a free account so you can access the data you need. - Under S&P Global Ratings search for the credit rating for Stock A by Entity. Under Issuer Credit Rating, find the Rating Type "Lacal Currency LT" and write down the Rating. -Repeat the above for Stacks and C. - If you can't find a rating for your company, write "R" and assume the spread is the same as BBB. -Rank the credit quality of your three stocks, where 1 is the highest credit quality and 3 is the lowest. If two stocks have the same credit quality, you can denote a tie with the same ranking that is, 1,1,2 or 1,2,2 are acceptable answers). -Each Issuer (A, B, and has a bond outstanding described in the following table. Issuer Annual Coupon A 0.00DX B 0.000% 8.000% Maturity Credit Quality | Par October 2 2022 Investment Grade 1000 October 2 2025 Investment Grade 1000 October 2 2022 Investment Grade 1000 Callable No No NO -Calculate and write down the cash flows for each bond. -Calculate and write down the discount rates for each bond. . -Calculate the price of each band. Assume that today is October 2, 2020. Round your answer to 2 decimal points (for cxample $953.101. - Calculate the yield to maturity of each bond. Use the RATE function in Excel. Write down the inputs that you use in the RATE function. Round your answer to 3 decimal points (for example, 9.882%). -Suppose all yields increase by 1% over the next year. Calculate and write down the new yield to maturity for each bond. Round your answer to 3 decimal points. Calculate the price of each bond. Assume it's now October 2, 2021. Be sure to consider how the timine of the cash flows has changed! Round your answer to 2 decimal points. Calculate your holding poriad return. Write down your cash inflows and cash outflows that make up the grafit. Write down your initial investment. Write down the holding period return for each bond. Round your answer to 3 decimal points Type your answers on the following solutions page. You should perform the necessary calculations in Excel. I have included many intermediate steps in the salutions, so there will be na partial credit. Please format your solutions so that it does not exceed one page. Please save the file as Assienment 4 FirstName LastName (ca. Assignment 4 - Sara Holland.docx). Page 2 of 2 3 of 61 wards DE English United States Focus E = - + 140% AutoSave - BBC= resignment 4-correction - Saved to try Mac Home Insert Draw Design Layout References Mailings Ravi View Share - Comments Investments Project Assignment 4 Instructions Research the current interest rate environment and graph the zero-coupon Treasury yield curve. The yield curve gives the relationship between time to maturity and interest rates. The yield curve is useful for two reasons. It can give us an idea of future interest rates. And we can look at the interest rates for each year and use those rates to discount other cash flows of the same credit quality. Note that U.S. Treasury securities are risk free AAA. Actually, I did this step for you, Zero-Coupon Treasury Yield Curve 0.56 0.45 20.40 0. 0.25 0.20 0.15 0.10 0.06 0.00 1 2 4 5 3 Maturity Years! To use the yield curve to price bonds with more credit risk, you need to know the yield spread. The yield soread is the additional return that bond investors require to hold a bond of worse credit quality. To find the discount rates for bonds with more credit risk, add the yield spread to each discount rate from the zero-coupon Treasury yield curve. Here is some information on yield spreads for Octaber 2020. Note that 100 basis points = 1% Credit Rating Yield Spread 100 bps BBE 200 bps BE 250 bps Psycat 3 551 was TE Engist United States 13 Focus E = - + 140% AutoSave - BBC= Assignment 4 -correction - Saved to my Mac Home Insert Draw Design Layout References Mailings Review Viera Table Design Layout Share - Comments Assignment 4 Solutions A B C Ticker Credit Rating Credit Quality Ranking Spread Cash Flows t- i t-1 t=2 t-3 t- t=4 t=5 Discount Rate t=0 t-1 L=2 t-3 t-4 t=5 Price Yield to Maturity Calculation Neer Pmt PU FV Yield to Maturity ONE YEAR LATER New Yield to Maturity L New Price HPR Calculation Cash inflows Cash Outflows Initial Investment Holding Period Return Page 33 3 of 61 warsis DE English United States) Focus E = - + 140%