Standard

1. Bond Ratings Look up Coca-Cola (KO), Gateway (GTW), Callaway Golf (ELY), and Navistar International (NAV). For each company, follow the "Financial Highlights" link and find the bond rating. Which companies have an invest- SPOOR'S

ment grade rating? Which companies are rated below investment grade? Are any -

unrated? When you find the credit rating for one of the companies, click on the "S&P Issuer Credit Rating" link. What are the three considerations listed that Standard & Poor's uses to issue a credit rating?

7.1 Bond Quotes You can find current bond prices at www.bondsonline.com. You want to find the bond prices and yields for bonds issued by Georgia Pacific. To find these bonds at the site, click the "Bond Search" link, then the "Corporate" link. Type "Georgia Pacific" in the issue block, select "All" on the pull-down menu, and hit "Find Bonds." What is the shortest maturity bond issued by Georgia Pacific that is being offered for sale? What is the longest maturity bond? What are the credit ratings for Georgia Pacific's bonds? Do all of the bonds have the same credit rating? Why do you think this is?

7.2 Bond Pricing You can find an online bond calculator at www.smartmoney.com. Follow the "Economy & Bonds" link and then click on the "Bond Calculator" link. What is the YTM for a bond that matures in August 2015 with a coupon rate of 9 percent and current price of 104.5? What about a bond with the same coupon and price that matures in August 2028? Why don't the bonds have the same price?

7.3 Yield Curves You can find information regarding the most current bond yields at money.cnn.com. Follow the "Bonds & Rates" link and the "Latest Rates" link. Graph the yield curve for U.S. Treasury bonds. What is the general shape of the yield curve? What does this imply about expected future inflation? Now graph the yield curve for AAA-, AA-, and A-rated corporate bonds. Is the corporate yield curve the same shape as the Treasury yield curve? Why or why not?

7.4 Default Premiums The St. Louis Federal Reserve Board has files listing historical interest rates on their web site www.stls.frb.org. Follow the link for

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