Money & Banking Assingnment

Topics: Bond, Bonds, Yield curve Pages: 2 (393 words) Published: August 4, 2013
Assignment
ECONOMICS 3307: MONEY AND BANKING
Summer 2013

Assigned: June 3, 2013
Due: June 17, 2013

Instructions:

* Answer all questions
* Late assignment will not be accepted.
* Get to the point. Be clear and concise.
* You may submit the assignment in a group of up to four students. Make sure you indicate clearly the names and IDs on the cover page of the assignment.

1. Coupon Bond Rate Go to http://www.globeinvestor.com/ under “market” select bonds. Choose 4 different bonds with the following characteristics:

* One Federal government bond trading at a premium with more than ten years to maturity * One corporate bond trading at a discount with less than ten years to maturity * One corporate bond trading at a premium more than ten years to maturity * One Provincial government bond trading at a premium with less than ten years to maturity

* For each bond, calculate the current yield.
* Compare the current yield to the yield to maturity. For which bonds is current yield closer in value to the yield to maturity? Explain

2. Term Structure of Interest Rates: Go to http://www.yieldcurve.com/MktYCplotter.asp

This web site allows you to plot the yield curves for UK Gilts and US Treasuries for different periods. 1. List the three facts about the term structure of interest rates

2. Select a period and print a plot of an upward yield curve. Make comments using the theories you studied about the term structure of interest rates.

3. Select another period and print a plot of an inverted yield curve and make comments using the theories you studied about the term structure of interest rates.

4. Compare, generally, between the UK Gilt and the US treasury yield curves in 2 and 3 citing the power of prediction of the theories of term structure of interest rates in predicting the 2008/2009 financial crisis.

3. The 2008/2009 financial crisis has a number of underlying...
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