HW of Corporate Bond's Analysis

Question: #1022

I chose 3M company’s Fixed Rate Notes, Ser F 2s 2002 Corporation Bond

EVALUATION OF THE CORPORATE BOND’S INVESTMENT RETURN AND

SYSTEMATIC RISK

1. Determine the Yield-To-Maturity (YTM) based on quarterly periods (March, June, September, December) for the past nineteen periods. (March 2010 through September 2014). [If September 2014 is not available, use data through June 2014.]

2. Look-up Bond Yield Averages for the corresponding nineteen quarterly periods (available in either Standard & Poor's Bond Guide or MERGENT’s Bond Record as per handout example) by the same bond rating classification. (Note: These publications are in the Marymount University Ballston Library.)

3. Utilizing EXCEL, (this is also available at our Computer Lab) complete the following statistical analysis: (Note: The best and most succinct discussion on using and interpreting EXCEL is the statistics text STATISTICS for BUSINESS and ECONOMICS, authored by Anderson, Sweeney, Williams, 2012, SOUTH-WESTERN CENGAGE Learning. ISBN 13: 978-0-538-48165-6)

a. Enter the two sets of data.

b. Evaluate your data by using EXCEL to compute:

1) DESCRIPTIVE STATISTICS

2) SCATTERPLOTS

3) REGRESSION ANALYSIS

Note: Make certain that the regression coefficients (a and b in the equation y = a + bx) in C.3.b.2) and C.3.b.3) are equal, frequently errors are made in these EXCEL applications which result in switching the dependent variable and independent variable.

4. Analyze the output for both sets of data, be certain to evaluate and discuss the statistical significance of the slope (b in the equation y = a + bx) and the coefficient of determination (r²). Use a 10% (.10) level of significance for each variable. (Include all statistical computer output in your report.)

5. Calculate and interpret, for your bond, the current and modified duration. (Include the spreadsheet output in your report.)

Solution: #1026

HW of Corporate Bond's Analysis

I chose 3M company’s Fixed Rate Notes, Ser F 2s 2002 Corporation Bond

EVALUATION OF THE CORPORATE BOND’S INVESTMENT RETURN AND

SYSTEMATIC RISK