Group Project 2

# Group Project 2 - Finance 221 Bond/CAPM Excel Project...

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Finance 221 Bond/CAPM Excel Project Compass Submission Due by 10 PM, Sunday, March 14 Please use Excel financial functions or algebraic time value of money equations to answer these questions in your spreadsheet. Please type the names of everyone in your group along with your TA’s name and discussion section at the top of the first page of your workbook. Please try to save & submit your Excel file in the 1997-2003 format. Part I: Bonds 1. The following three \$1000 par value, annual coupon bonds have an 10% annual coupon rate. Also, each bond’s time to maturity is given in the table below. Bond Name Years to Maturity Krusty Burger 2 Massive Dynamics 15 Cenipede Corp 40 Calculate each bond’s price at the following interest rates (APR): 3%, 6%, 9%, 12%, 15%, . Also, create a graph where you plot each bond’s values against their required returns in order to illustrate interest rate risk. 2. The following three \$1000 par value, annual coupon bonds have 15 years to maturity and a 7 % annual coupon rate. Also, each bond’s yield to maturity is given in the table below. Bond Name Yield to Maturity AAA Enterprises 5% BBB Ball Bearings 7% CCC Cruises 9% Assume that each bond’s yield to maturity will sta y constant over the remaining 15 years to maturity and calculate each bond’s price today and each & every year as the bond gets closer to maturity (i.e.: cal culate each bond’ s price with 15,14,13,12, …1, & 0 years to maturity). Also, break down each bond’s expected total return (the YTM) annually into its current yield and expected capital gains yield for 15 to 1 years remaining to maturity. Finally, create one graph th at shows how each bond’s price changes over time from 15 to 0 years to maturity. 3.

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## This note was uploaded on 02/14/2011 for the course FIN 221 taught by Professor Dyer during the Spring '09 term at University of Illinois, Urbana Champaign.

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Group Project 2 - Finance 221 Bond/CAPM Excel Project...

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