Part 1: Bond Performance Analysis and Interest Rate Trends

1. To grade your project your professor needs to see the information on the bonds you chose. Copy the bonds quotations into your project.

2. What were the last prices of the bonds (from the Last Sale column)? What does this price mean?

3. Assume the par value of the bond is $1,000.
a. How much will an investor pay for a bond purchased at the price listed in the
Last Sale column?
b. Calculate the annual coupon interest payments.
Show your work in your project.

4. The YTM is listed in quotations of the bonds (in the Last Sale column, Yield). What
does it mean? (No calculations are required for this section.)

5. Calculate the Macaulay duration and modified duration of these bonds. Use an online duration calculator. Present the results of your calculations in your project. How will changes in interest rates affect the bonds’ prices?

6. Using the forecast of interest rates (short-term and long-term) that you found in Stage 1 of the project, create a forecast of the bonds’ prices. Explain your results.

7. Write at least two pages of analysis of the bonds. Answer the following questions, explaining each answer.
a. If you are going to buy a bond, which bond would you choose? Why?
b. What connections are there among economic trends analysis, bond market performance, and investment decisions? Discuss these connections.
c. Look at the balance sheet and income statement of the companies. What data or ratios support your decision to buy this bond or not?

Part 2: Stock Market Indexes

In this part of the project, we will investigate three stock market indexes: S&P 500, Dow Jones Industrial Average (DJIA), and the NASDAQ Composite.
From the Yahoo! Finance home page:
• Click on “S&P 500” on the front page. The original graph shows the index for the current business day.
• Change the view to the full screen, then change the view to two years (2Y).
• Using the +Comparison button above the graph, add DOW and NASDAQ to the
graph to show the percentage change for each day relative to the first day (2 years ago) and the level of each index.

Write a report (minimum two pages, double-spaced) analyzing the results you received. At a minimum, respond to all of the following:

• What type of indexes are the S&P 500, DJIA, and NASDAQ Composite?

• What factors influence the performance of these indexes?

• Is there a difference between the performances of S&P 500, DJIA, and NASDAQ
Composite over these two years? If so, explain the factors that contribute to those
differences.

• Using the forecast of economic conditions and trends you found in Stage 1 of the
project, what tendency of the levels and percentage changes of these indexes do
you expect in the short term and in the long term?

• Will these findings change your decision to buy the bond you chose in Stage 1 of
this project, versus investing in stock market or in both? Explain your answer.

Part 3: Reflection

Write a paragraph in your own words reflecting on what you learned from the assignment and how you think you could apply what you learned in the workplace or in your everyday life.

Presentation of Paper and Writing

• Organization, format, and presentation of paper including the title page, introduction, body, and summary. Begin each section with a subheading; use the subheadings described here

• Use of tables, figures, and other graphics to summarize and support analysis presented in the paper. All tables and charts should have the numbering system: “Table 1,” a substantive title, and a reference to the source of the information (3% of the project grade).

• Logical and smooth transitions and relationships among sections of the written report (3% of the project grade).
Research sources and significance of research information and data, and use of APA citation methodology (5% of the project grade).