In this assignment, you will apply the principles used in calculating the price of a bond. Instructions: The yield of the 10-year US Treasury bond is 1.20%. It is the risk-free rate. You work for an investment manager and your boss
Due Date: 11:59 pm EST Sunday of Unit 7
Points: 100
Overview:
In this assignment, you will apply the principles used in calculating the price of a bond.
Instructions:
The yield of the 10-year US Treasury bond is 1.20%. It is the risk-free rate. You work for an investment manager and your boss asks you to calculate the price of a 10-year corporate bond that yields 3.00% more than its risk-free rate and has a face value of $1,000. The fixed coupon of this corporate bond is 5.00%. Both bonds pay coupons annually.
• What is the current price of the corporate bond?
• Calculate the price of the bond if its yield increased by 1.00%.
•
Calculate the price of the bond if its yield decreased by 1.00%.
• Please discuss the risk associated with this change in interest rates?
Requirements:
• Submit a Word document or Excel spreadsheet.
• At least three pages in length, excluding the Title and Reference pages.
Be sure to read the criteria below by which your work will be evaluated before you write and again after you write.
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Evaluation Rubric for Unit 7 Assignment
|
CRITERIA |
Deficient |
Needs
Improvement |
Proficient |
Exemplary |
|
|
0 – 11 points |
12 – 15 points |
16 – 19 points |
20 points |
|
Current price of a corporate bond |
The bond’s current price calculations are missing or
incorrect. |
The bond’s current price is calculated but is
missing key details. |
The bond price is calculated but is missing minor
details. |
The bond’s current price is accurate and is
calculated correctly. |
|
Cost if yield increases by 1.00% |
The bond’s price calculations are missing or
incorrect. |
The bond’s price is calculated but
is missing key details. |
The bond’s price is calculated but
is missing minor details. |
The bond’s price is accurate and is
calculated correctly. |
|
Cost if yield decreases by 1.00% |
The bond’s price calculations are missing or incorrect. |
The bond’s price is calculated but
is missing key details. |
The bond’s price is calculated but
is missing minor details. |
The bond’s price is accurate and is
calculated correctly. |
|
Discussion on risk and interest rates in bonds |
The discussion on risk and interest
rates is missing or incorrect. |
A discussion on risk and interest
rates is present but missing key details. |
A discussion on risk and interest rates is present
but is missing minor details. |
The discussion on risk and interest rates is
thoughtfully and accurately addressed. |
|
|
0 – 5 points |
6 – 7 points |
8 – 9 points |
10 points |
|
Paper Length |
Less than 3 pages |
n/a |
n/a |
3 pages or more. |
|
Clear and Professional Writing and APA Format |
Errors impede
professional presentation; guidelines not followed. |
Significant errors that
do not impede professional presentation.
|
Few errors that do not
impede professional presentation. |
Writing and format
are clear, professional, APA compliant, and error free. |
© 2022 Post University, Waterbury, CT ALL RIGHTS RESERVED