Bond analysis is attached to assist. Need assistance with introduction paragraph, recommendation and reflection paragraph based on the bond analysis provided.
In this part of the project you are to assume that your client plans to invest in bonds and (or)
stocks issued by Walmart, Inc. The company, Walmart, for this part of the project has bonds
listed on the website http://finra-markets.morningstar.com/BondCenter/Default.jsp. To find the
information on bonds, click on Search in the middle of the screen (under Market Center Bond
Guide), under Quick Search type the Issuer Name and the Symbol, and click SHOW RESULTS.
1. Introduction, A short introduction that explains the purpose of the paper and provides an
overview of the contents that follow
1. Now look the results of your analysis from the point of the COMPANY’S
management. Develop a specific recommendation, with supporting rationale for the
COMPANY’S management – Think about the financial strategy of the company, how to best
balance THE COMPANY’S financial leverage to optimize shareholder wealth going forward taking
into consideration the company’s current market position, credit rating, dividend policy, etc
2. Reflection – the students should write a paragraph in their own words reflecting on what they learned
from the assignment and how they think they could apply what they learned in the workplace or
everyday life.
Walmart Bond A1
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The bond last price: (1000/100) *106.51=$1065.10
The annual coupon interest payments: $1000*5.250% = $52.5
The bond’s current yield: 52.5/1065.10= 4.93%
YTM = 4.93%
Walmart Boned B2
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The bond last price:(1000/100) *138=$1380
The annual coupon interest payments: $1000*7.550% = $75.5
The bond’s current yield:75.5/1380= 5.47%
YTM= 3.96%
To make an informed decision of which bond to purchase, we need to asses’ various factors such
as creditworthiness, YTM, Coupon rate, and maternity date. As both bonds are issued by
Walmart, we will keep concentration on YTM. Bond A last price is $1065.10 with a coupon rate
of 5.25 % and YTM of 4.93%. Bond B last price is $1380 with a coupon rate of 7.55% and YTM
of 3.96%. Considering all other factors are equal bond A is more attractive investment with a
higher return rate.
Neither of the bonds are callable and how it might affect my decision it solely depends on my
overall investment plan. Callable bonds are more vulnerable to be affected by interest rates
fluctuations. However, they are a good option in the case of a short-term investment with
incentives and a quick way out. On the other hand, Noncallable bonds are less subjected to be
affected by interest rates and more likely to attract a long-term investor.
Bonds ratings is an evaluation of the creditworthiness of the bond issuer and are provided by
credit rating agencies such as S&P Global Ratings, Moody’s, and Fitch Group. Higher rating
companies carries less risky investment, while those with lower rating are seen as riskier
investment. According to Fitch Group Walmart long term default is AA3 which is an indicator
off a healthy stable company that is less likely to default on their obligations.
From company management perspective bonds represent a form of debt. Given that, Debit/
Equity and financial leverage ratios play a crucial role in providing a deep insight of the bond
issuer overall financial stability and ability to manage debt. Lower debt/ equity and financial
leverage ratio are generally good sign of a low-risk investment. In this case Walmart debit/equity
and financial leverage ratios have shown a gradual decline over the past three years. This decline
strongly suggest that Walmart have been effectively increasing its assets while maintaining
control over debt levels. From an investor standpoint, seeing these ratios decline is a positive
sign as it is an indicator of the company lower reliance on debt. These trends give the investor
more confidence in the company ability to meet its financial obligation.
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Formatting
Title Page
Citation
Outline
