Explore fidelity.com and americanfunds.com. What are some of the differences between these two mutual fund families?

PART 1

ANSWER ONLY ONE QUESTION IN THIS PART

In this exercise, we will examine how the yield on municipal bonds relates to the yield on taxable bonds and also how bond ratings affect the yield that a bond pays. Go towww.bondsonline.com .

1.    Click on "Today’s Market," then click on "Composite Bond Yields." Under the Municipal Bonds column, write down the yield on 20-year, AAA-rated bonds. Divide this value by (1 - 0.35). The value 0.35 is assumed to represent the investor’s marginal tax bracket. The answer you get is intended to represent the equivalent before-tax yield on a taxable investment.
       Now compare this value to the yield on the 20-year, AAA-rated corporate bond (which represents the yield on a before-tax basis of a taxable investment). What is the difference between this value and the value you just computed? Of course, they will never be the same because of the ineffi ciencies in the market and different tax rates for investors.

2.    Bond ratings and yields were discussed in the chapter. Scroll up and click on "Corporate Bond Spreads" along the left margin. These spreads represent the difference in yields between a given rated bond and a risk-free Treasury bond. We will work with 10-year issues (across the top). As an example, a Aaa/AAA industrial bond pays 20 to 50 basis points (percentage points) more than a Treasury bond. The AAA industrial is very low risk, but it is still riskier than a Treasury bond issued by the U.S. government.

3.    What is the yield spread for a 10-year, A3/A- industrial bond? How many basis points is it greater than a 10-year, Aaa/AAA industrial bond?

4.    What is the yield spread on the highest rated junk bond (10-year column)? Look up Ba1/BB+

5.    What is the yield spread of the lowest rated junk bond (10-year column)? Look up Caa/ccc.

6.    Generally speaking, what happens to the yield spread as the maturity period increases from 1 year to 30 years for all different categories of bond ratings?

PART 2

ANSWER ALL QUESTION IN THIS PART

1. Explore fidelity.com and americanfunds.com. What are some of the differences between these two mutual fund families?

2. Work through the Web Exercise at the end of the chapter. What did you find most interesting about foreign exchange? 

3. Work through the Web Exercise at the end of the chapter. What would a prospective buyer find most interesting on this website? (www.coldwellbanker.com)

4. 1. What did you like best about the course?
   2. What did you like least about the course?
   3. What do you feel is the most important concept that you learned from this course?
   4. For the benefit of future students, if you could change one thing about this course, what would it be?
   5. What do you feel the instructor did well during this course, and are there any areas in which you feel the instructor could improve in the future?

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