Today, you bought an IBM 10 year non-callable bond that pays a 7% coupon. Interest payments are semiannual. You bought it a 8.5% yield. How much did you pay? Interest is paid on March 15 and September 15. Use an Actual/365 day count convention.
Later the same day, IBM misses earnings. The yield on your bond rises to 9%. What’s it worth now?
Hint: use XIRR.
In the wake of Argentina’s most recent default, you buy their sovereign bonds that were selling for 12 cents on the dollar. Assuming these were 8% coupons, 20 year, US dollar denominated bonds, what yield does that imply if the bonds were to be redeemed at full value?
The bondholders as a group agree to take a 30% haircut. What yield does that imply?
(You may want to peruse this page on Wikipedia).
Hint: use XIRR.
Goldman is selling Albany, New York’s 10 year general obligation bonds at par, at a of 2.25% yield to an investor with a 35% tax rate. What is the taxable equivalent yield? The issuer pays interest quarterly.
Hint: this one has nothing to do with XIRR.
- Show the US yield curve. Do the same for three to five other countries. Turn in a single page, showing both data and a graph.
- For one country, show the yield curve from today, a month ago, three months ago, and a year ago. If you cannot find this data, choose another country. Turn in a single page, showing both data and a graph.
- In the US, prepare or find on the internet a table summarizing credit spreads. For the various credit ratings (AAA, AA, A, etc,) show the max and min credit spreads.