1. Select three different corporate bonds from three different companies. The bonds must have years to maturity at least 5 years apart from each other. One of the bonds should be

issued by the company evaluated by your group in the first written assignment. a. A good bond data resource is: http://finra-markets.morningstar.com/ 2. Calculate the duration of each bond and the duration of a bond portfolio investing equally in the three bonds. 3. For reference purposes, select an additional two bonds issued by the companies from step 1 that match the longest maturity bond in your portfolio (i.e., you will analyze 5 bonds in total) a. Example: In step 1 you use a 2030 bond for Co. A, a 2040 bond for Co. B and a 2045 bond for Co. C. So, you choose a 2045 bond from Co. A and a 2045 bond from Co. B to be able to compare to the already selected 2045 bond from Co. C. b. Provide the key details for the additional bonds including spread to treasury. These two bonds are not included in your portfolio but will be useful in your overall analysis. 4. Your research indicates: a. Treasury bond rates will increase, and, b. The spread between corporate bonds and Treasury bonds will widen. 5. Forecast a change in yields for the three bonds in your portfolio. Discuss the properties of your three-bond portfolio with respect to returns and risk (interest rate risk and default risk). Including: What assumptions drive your change in treasury bond rates? What assumptions drive your change in spreads for each bond? How would you change the weights of the bonds in the portfolio (from equal) to take advantage of your research? How would you quantify the impact? What happens to the interest rate risk and default risk in your portfolio?