Bonds

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• Bonds
• The Stock Market Game TM

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Bonds in General

• Universe of domestic bonds is greater than 3
  million bonds
• US Treasuries
• Municipals (State Local)
• Agencies
• Corporates
• Bonds dont trade everyday
• Prices are a function of ratings, federal
  interest rate, and availability

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Bonds in General

• Bonds are identified by a 9 digit cusip
• Treasury bonds sell in increments of 100
• Municipals and corporates trade in increments of
  1,000

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Bonds in General

• Buy a bond you also pay for the accrued interest
  plus commission
• Sell a bond you also get accrued interest less
  commission less SEC fee
• Accrued interest for treasuries is calculated
  differently than for municipals and corporates
  (see handout)

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Bonds in General

• 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
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Bonds in General

• Bonds come in many flavors
• Fixed and variable interest rates
• Tax deductibles
• Convertibles
• Callable and non-callable
• Puts
• Interest compounding
• Various coupon frequencies
• Inflation adjusted

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Bonds in The SMG

• SMG Bond selection criteria
• Non-callable
• Treasuries, agencies, municipals and corporates
• State issued municipals only
• Fixed coupon rate
• Coupon frequencies
• Monthly
• Quarterly
• Semi-annually
• Yearly

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Bonds in The SMG

• SMG Bond selection criteria cont
• 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
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Bonds in The SMG

• 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
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Bonds in The SMG

• 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 0000 to 2300 Hours except
  when system is unavailable

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Bonds in The SMG

• 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
• 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
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