Tedext

Bond market and impact of interest rate - Investment strategy

DQ1:
Two bonds A and B have the same credit rating, the same par value and the same coupon rate. Bond A has 30 years to maturity and bond B has 5 years to maturity.

- Discuss which bond will trade at a higher price in the market - Discuss what happens to the market price of each bond if the interest rates in the economy go up. - Which bond would have a higher percentage price change if interest rates go up? - Try to substantiate your argument with a numerical example.

 As a bond investor, if you expect slowdown in the economy over the next 12 months, what would be your investment strategy?
Provide your explanations and definitions in detail and be precise. Comment on your findings.

Provide references for content when necessary. Provide your work in detail and explain in your own words. Support your statements with peer-reviewed in-text citation(s) and reference(s).DQ2:
The cost of long-term borrowing is usually higher than the cost of short-term borrowing.

The graph that shows the relationship between maturity and interest rates for U.S. Government’s borrowings (Treasuries) is called “term structure of the interest rates” or “the yield curve”. Shape of the yield curve is often used by economists to forecast future status of the economy 

1. Discuss why long-term rates are usually higher than short-term rates (upward yield curve)

2. Discuss under what economic conditions long-term rates might not be higher than shortterm rates (flat or inverted yield curve).

3. Go to http://www.bloomberg.com, browse various links on the site, find the yield curve for the day of your search, and

4. Interpret your observation of the yield curve.DQ3:
Just provide a brief point in CLA2
Eg: 1. Introduction
2.
3.
4.
5. Conclusion

Welcome to week 5 of your course. This discussion question will help you prepare for your CLA2 paper and final CLA2 PPT. Read the CLA2 assignment listed in week 8 of the course. Then, please provide an outline that itemizes the concepts that you will include in your CLA2 paper and final PPT.

Please be sure to include concepts learned in the course and any information from your CLA1 paper if applicable. Provide some brief details for each item that is outlined. Please keep in mind that you should have place-holders for material not yet covered in lecture from week 6 and 7.

This is complete write up of your portfolio formation in a Word file, with calculations copied and
pasted in it from your Excel file.

1. Select the stocks of three publicly traded companies from different industries. State the
criteria for selecting those securities.

2. Retrieve monthly data on adjusted closing prices of your securities from Yahoo Finance
for the past 10 years and calculate the monthly rate of return of the stocks for every
month.

3. Calculate the mean, variance, and standard deviation of the stocks’ monthly returns.

4. Calculate the correlation coefficient between every possible pair of stocks’ returns.BUS 550 Hybrid Syllabus32 of

5. Decide what percentage of your money (weights) you want to invest in each stock and
state the criteria you used to select those weights.

6. Now calculate your portfolio’s mean monthly return, variance, and standard deviation.

7. Assuming your portfolio return follows a normal distribution, calculate the chance that
your portfolio loses 10% of its value during any month?

8. Assuming you have invested $100,000 in your portfolio, what is the value at risk (VaR)
of your portfolio at any particular month at 99% confidence level?

9. Now randomly change your portfolio’s weights 100 times (note total weights should
always be 100%), for each weight combination calculate the mean and standard
deviation of your portfolio, and then draw the efficient frontier.

10. For each item mentioned above explain your rationale and cite peer-reviewed and/or
seminal sources.Each DQ requied one academic reference

Bond market and impact of interest rate - Investment strategy

  • Order

  • Payment

  • Processing

  • Delivery

Validation error occured. Please enter the fields and submit it again.
Thank You ! Your email has been delivered.