1. Bonds & The Stock Market Game TM

2. 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

3. 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

4. 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)

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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