Part I
Deliverable Length: 500-700 words
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 long-term 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 long-term 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 both companies.
Which bond is receiving the higher 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?
Which company has a better credit rating? Explain your answer.
Based on the credit rating, which company do you believe the bank feels more secure will 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 is more financially attractive? Explain why you chose the answer you did.