Economics 494 INVESTMENT ECONOMICS
	Spring 2015

Bonds

Your company anticipates needing $10,000,000 in 10 years.  You want to finance this with a fixed income portfolio consisting of two securities:  State of Israel zero coupon bonds maturing on 03/15/2023 and Microsoft Corporation bonds maturing on 02/08/2041.  Both are non-callable and both carry a AAA rating from Fitch’s.  You can find information on these bonds at this site:

http://screener.finance.yahoo.com/bonds.html

• Create a spreadsheet that shows the price and duration of each bond for yields-to-maturity ranging in full percentage points from 1% - 10%.  Assume the settlement date for each security is 05/01/2015 and they both pay semiannual coupons.

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• For each of the possible yields-to-maturity in (1), how much should be put in each security now in order to meet your company’s cash flow needs and also immunize it from interest rate risk?

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Output

No written analysis is necessary.  Submit your spreadsheet as an E-mail attachment.  This assignment is due on Thursday, May 7.