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2 pages/β‰ˆ550 words
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Style:
MLA
Subject:
Accounting, Finance, SPSS
Type:
Essay
Language:
English (U.S.)
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Topic:

The Three Taxable Bonds on The Wall Street Journal

Essay Instructions:

Instructions
From the Wall Street Journal (or similar media or website) select 3 taxable bonds – either U.S. Treasury, Agency or Corporate – maturing between 5-7 years from now.
Identify the 3 bonds including name of issuer, coupon, maturity, yield-to-maturity, market price and ratings.
Compare the difference in yields and explain differences based possibly upon differences in time to maturity, rating, liquidity or other factors.
Decide which bond to purchase and why. Explain your decision including above factors plus your view of the outlook for inflation and interest rates.

FIN 347 – WS2 – Buy a Bond!

Learning Objective

Wall Street Journal Brief 2 (WS2) is intended to apply knowledge gained on bonds to compare three potential fixed income securities for investment.

Instructions

From the Wall Street Journal (or similar media or website) select 3 taxable bonds – either U.S. Treasury, Agency or Corporate – maturing between 5-7 years from now.

-          Identify the 3 bonds including name of issuer, coupon, maturity, yield-to-maturity, market price and ratings.

-          Compare the difference in yields and explain differences based possibly upon differences in time to maturity, rating, liquidity or other factors.

-          Decide which bond to purchase and why.  Explain your decision including above factors plus your view of the outlook for inflation and interest rates.


WALL STREET JOURNAL ARTICLE GRADING RUBRIC

 

% WT.

0%

80%

100%

 

 

POOR

ADEQUATE

EXCELLENT

Identify instrument

20%

You missed something.

----

Bonds identified including:


-      Issuer


-      Coupon


-      Maturity


-       

Compare Yield, price and rating

20%

You missed something.

----

-      Yield to maturity


-      Market price


-      Rating


 

Decide which bond to purchase

40%

 

- Make the decision.


- Decision does not make sense.

-      Make the decision.


-      Explanation makes sense.


-       

Writing

20%

3+ errors in grammar or punctuation.


 


 

Good grammar, spelling, punctuation, professional writing, and syntax.


 


Limited passive voice writing.


 


1-2 errors in grammar or punctuation.

Excellent grammar, spelling, punctuation, professional writing, and syntax.


 


Minimal passive voice writing.


 


0 errors in grammar or punctuation.
Essay Sample Content Preview:
Subject and Section
Professor’s Name
May 29, 2020
142875329565Bonds
The bonds identified above are examples of corporate bonds that will mature five to seven years from this year. The bond issued by ABI has the highest coupon rate among the three, which is good as it means that the holder of this bond will receive the highest rate of interest during the bond term. This is fit for investors who plan to reinvest the interest they receive in the future to further increase their earnings (Nayak, 59-80). The bond issued by AI will be the first to mature, so the holder of this bond will be the first one to also receive the cash he invested. Although it has the lowest coupon rate and yield to maturity, this is the best one for those who want to get their cash back as soon as possible so they may use it for other purposes. In other words, this bond is the most liquid among the three. The bond issued by ABI also has the highest yield to maturity, so the holder of this will receive the highest return assuming all holders held the three bonds until they mature (Beckworth et al., 1139-1144). As of date, the bond from CIHI has the highest market price while that of the ABI has the lowest. According to Moody's rating, all the bonds are considered medium investment grade. We considered that bonds with investment-grade have a low risk of being defaulted, with the bond from AI having the least risk. The three bonds have a medium investment grade, so they still have speculative elements, and there is a possibility that the issuers will fail to repay such (Jaramillo, 10-117).
Aside from the factors above, we must also consider the effect of inflation and interest rates in deciding what bond to buy as these affect the prices of the bonds. An increase in inflation or interest rate will lower the price of bonds, so we should buy bonds that have a high potential of high prices in the future. For example, in case there is a possibility that a bond's yield can't keep up with the rising inflation, the ...
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