Bonds &

The Stock Market Game TM

Bonds in General Universe of domestic bonds is greater than 3

million bonds US Treasuries Municipals (State & Local) Agencies Corporates

Bonds don’t trade everyday Prices are a function of: ratings, federal interest rate,

and availability

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

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)

Bonds in General Bonds are priced per $100 of bond principal

A $4,000 bond with a price of $99.50/$100will 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

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

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

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

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

T M or C Seq # Maturity Year

Annual interest rate

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 00:00 to 23:00 Hours

except when system is unavailable

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