CIS 4620 Financial Information Technologies

May 22, 2009

Bond Pricing Application

Group Project:

Mohamed Dagdag

Kervin Duncan

Douglas Vanterpool

 

Bond Pricing Application

Renowned for its business program, Baruch is not really known for the outstanding CIS programs offered.  CIS majors are a small group; for the most part we have known each other for the last few years.  As seniors it is easy for us to create groups and work together as we have countless other times in other courses.   Financial Information Technologies is no different.  Kervin, Mohamed and I have taken other courses together, and although we have not worked together before, we know what to expect from each other.  After finalizing the group members we each suggested projects best suited for us.  For the semester group project, we chose to create a Bond Pricing Calculator using C# in Visual Studio 2005.  Bond pricing seemed straight forward but it also provided various levels of intricacies.  Once the topic was finalized, we began to discuss how to divide the work.  Since most of the work was in programming the actual calculator, it was decided that two members would tackle it, leaving the other to the written portion.  Kervin and Mohamed have more programming experience so the programming portion was mostly theirs.  Although all members contributed to the overall project,  I was left to do the written portion.

This overview is to provide descriptions and explanations for the various inputs required when evaluating pricing and returns associated with bonds.  Typically, a bond pricing calculator is utilized to solve for the bond’s yield to maturity which considers the coupon rate, the time to maturity, the issue and settlement date, and assumes that interest payments are reinvested at the bond’s coupon rate.  Our calculator goes further by adding bond price and derivative calculations.

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To calculate a bond’s yield to maturity using the bond pricing calculator several inputs are needed.  They include the spread, settlement date, maturity date, and coupon rate.  The number of payments is derived from the payment terms.  

Bond prices constantly change just as stocks and all publicly traded securities.  For securities traded through an exchange, the last reported price at which a security was sold is the market value (price).  The current pricing of the bond can be obtained from the exchange on which the bond trades.

Par value of a bond, also known as the face or principal ...

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