Using the Wall Street Journal or Barron’s, find the bond yields for Treasury securities with the following maturities: three months, six months, one year, three years, five years, 10 years, 15 years, and 20 years. Construct a yield curve based on these reported yields, putting term-to-maturity on the horizontal (x) axis and yield-to-maturity on the vertical (y) axis. Briefly discuss the general shape of your yield curve. What conclusions might you draw about future interest rate movements from this yield curve?
Using the resources available at your campus or public library (or on the Internet), select any six bonds you like, consisting of two Treasury bonds, two corporate bonds, and twoagency issues. Determine the latest current yield and promised yield for each. (For promised yield, use annual compounding.) In addition, find the duration and modified duration for each bond.
a. Assuming that you put an equal amount of money into each of the six bonds you selected, find the duration for this six-bond portfolio.
b. What would happen to your bond portfolio if market interest rates fell by 100 basis points?
c. Assuming that you have $100,000 to invest, use at least four of these bonds to develop a bond portfolio that emphasizes either the potential for capital gains or the preservation of ital gains or the preservation of capital. Briefly explain your logic.