Bonds
&
The Stock Market Game TM
Bonds in General
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Universe of domestic bonds is greater than 3
million bonds
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US Treasuries
Municipals (State & Local)
Agencies
Corporates
Bonds don’t trade everyday
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Prices are a function of: ratings, federal interest rate,
and availability
Bonds in General
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Bonds are identified by a 9 digit cusip #
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Treasury bonds sell in increments of $100
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Municipals and corporates trade in
increments of $1,000
Bonds in General
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Buy a bond you also pay for the accrued
interest plus commission
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Sell a bond you also get accrued interest less
commission less SEC fee
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Accrued interest for treasuries is calculated
differently than for municipals and corporates
(see handout)
Bonds in General
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Bonds are priced per $100 of bond principal
A $4,000 bond with a price of $99.50/$100
will cost you:
(40 x 99.50 = $3,980) + accrued interest + commission
If you sell a $4,000 bond you will receive:
(40 x 99.50 = $3,980) + accrued interest – commission – SEC fee
Bonds in General
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Bonds come in many flavors
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Fixed and variable interest rates
Tax deductibles
Convertibles
Callable and non-callable
Puts
Interest compounding
Various coupon frequencies
Inflation adjusted
Bonds in The SMG
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SMG Bond selection criteria
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Non-callable
Treasuries, agencies, municipals and corporates
State issued municipals only
Fixed coupon rate
Coupon frequencies
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Monthly
Quarterly
Semi-annually
Yearly
Bonds in The SMG
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SMG Bond selection criteria cont…
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No puts
No bonds indexed to inflation
S & P designated investment grade (BBB or greater)
Bonds with maturity date greater than 5 years
Reduced # of bonds from 3 million to
8 thousand
Bonds in The SMG
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Bonds selected will be priced daily by S & P
Regions can be flagged by coordinators to allow bond
trading
Bond ticker symbols will have the following 12 position
format:
AXXXX.YYNN.N
T M or C
Seq #
Maturity Year
Annual
interest rate
Bonds in The SMG
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Bonds can not be short sold
Bonds like mutual funds trade real time
(no cancellations)
Coupon payments are posted when due
Bonds can be traded 00:00 to 23:00 Hours
except when system is unavailable
Bonds in The SMG
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Trades entered on weekends and holidays
will post next business day. Trades, as usual,
will reside in pending until then
Diversity rule applies to bonds also
Margin requirements
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Stocks and mutual funds at 50%
Corporate bonds at 75%
Municipal bonds at 90%
Treasury bonds at 96%
So buying power calculation is slightly more complex