Assignment (7): Vanilla Bond Valuation
Word Count: 1,200 Words
Assignment Requirements below:
Key Assignment Draft
Understanding how to properly value a vanilla bond is essential for finance. Find a
company with debt and that pays dividends. You can use the following stock screener to
find a company: http://www.google.com/finance/stockscreener. Add the criteria of longterm debt to assets to ensure the company has debt. Add the criteria of dividend per share.
Find the company’s financial pages at: http://www.sec.gov/edgar.shtml. Look at the longterm debt on the balance sheet. Determine the coupon price, the length until maturity and
the yield to maturity. Calculate today’s price of the bond.
List the pertinent information on the bond you chose and then calculate the price
of one bond from one company.
Choose another company, find a bond, list all pertinent information and calculate
Which bond is receiving the better price? Explain your answer.
From a time value of money frame of mind, what does each rate say about the
viewpoint on the time value of money?
What does that tell you about the credit rating of each company?
Which company has a better credit rating? Explain your answer.
Based on the credit rating, which company do you think the bank feels more
secure w– ill pay back the loan? Explain your answer.
Why does the bank charge more interest for one company than another?
What does the credit rating say to an investor?
Which bond looks more attractive from the company’s view point? Explain why
you chose the answer you did.
Bond Information and Valuation: 30 points; the concepts are fully defined and related
to the issues with no exceptions.
Comparison of 2 Bonds: 30 points; the concepts are fully defined and related to the
issues with no exceptions.
TVM and Bond Rates: 30 points; the concepts are fully defined and related to the issues
with no exceptions.
Credit Rating: 45 points; the concepts are fully defined and related to the issues with no
Writing, grammar and APA style:15 points; Grammar is polished with advanced word
choices; APA style is completely followed.