1.How risky are the Norfolk Southern Railway bonds?

Low risk
2. What types of risk are relevant to your risk assessment?
Stability, period of time
3. In terms of risk, how do these bonds compare with a comparable 20-year issue?
4. What is your recommendation?

100 yr bond, 250M

Note for purposes of analysis, assume tha
6% coupon paid semmiannually
YTM
3%
Y
CF
Factor
PV CF
Weight Duration Convexity
0 -$250.00
1
7.5 0.970874 7.281553
2.9% 0.029126 0.054908
2
7.5 0.942596 7.069469
2.8% 0.056556 0.159928
3
7.5 0.915142 6.863562
2.7% 0.082363 0.310539
4
7.5 0.888487 6.663653
2.7% 0.106618 0.502491
5
7.5 0.862609 6.469566
2.6% 0.129391 0.731782
6
7.5 0.837484 6.281132
2.5% 0.150747 0.994656
7
7.5 0.813092 6.098186
2.4% 0.170749 1.28758
8
7.5 0.789409 5.920569
2.4% 0.189458 1.607243
9
7.5 0.766417 5.748125
2.3% 0.206933 1.950537
10
7.5 0.744094 5.580704
2.2% 0.223228 2.314554
11
7.5 0.722421 5.41816
2.2% 0.238399 2.696567
12
7.5 0.70138 5.260349
2.1% 0.252497 3.094031
13
7.5 0.680951 5.107135
2.0% 0.265571 3.504566
14
7.5 0.661118 4.958384
2.0% 0.277669 3.925952
15
7.5 0.641862 4.813965
1.9% 0.288838 4.356118
16
7.5 0.623167 4.673752
1.9%
0.29912 4.79314
17
7.5 0.605016 4.537623
1.8% 0.308558 5.235226
18
7.5 0.587395 4.40546
1.8% 0.317193 5.680713
19
7.5 0.570286 4.277145
1.7% 0.325063 6.128062
20
7.5 0.553676 4.152568
1.7% 0.332205 6.575846
21
7.5 0.537549 4.03162
1.6% 0.338656 7.022748
22
7.5 0.521893 3.914194
1.6% 0.344449 7.467554
23
7.5 0.506692 3.800188
1.5% 0.349617 7.909148
24
7.5 0.491934 3.689503
1.5% 0.354192 8.346505
25
7.5 0.477606 3.582042
1.4% 0.358204 8.778687
26
7.5 0.463695 3.47771
1.4% 0.361682 9.204836
27
7.5 0.450189 3.376418
1.4% 0.364653 9.624175
28
7.5 0.437077 3.278076
1.3% 0.367144
10.036
29
7.5 0.424346 3.182598
1.3% 0.369181 10.43966
30
7.5 0.411987 3.089901
1.2% 0.370788 10.8346
31
7.5 0.399987 2.999904
1.2% 0.371988 11.2203

32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76

7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5

0.388337
0.377026
0.366045
0.355383
0.345032
0.334983
0.325226
0.315754
0.306557
0.297628
0.288959
0.280543
0.272372
0.264439
0.256737
0.249259
0.241999
0.23495
0.228107
0.221463
0.215013
0.20875
0.20267
0.196767
0.191036
0.185472
0.18007
0.174825
0.169733
0.164789
0.15999
0.15533
0.150806
0.146413
0.142149
0.138009
0.133989
0.130086
0.126297
0.122619
0.119047
0.11558
0.112214
0.108945
0.105772

2.912528
2.827697
2.745337
2.665375
2.587743
2.512372
2.439196
2.368152
2.299176
2.23221
2.167194
2.104072
2.042788
1.98329
1.925524
1.869441
1.814991
1.762127
1.710803
1.660974
1.612596
1.565627
1.520026
1.475754
1.432771
1.391039
1.350524
1.311188
1.272998
1.235921
1.199923
1.164974
1.131042
1.098099
1.066116
1.035064
1.004917
0.975647
0.94723
0.919641
0.892855
0.86685
0.841602
0.817089
0.79329

1.2%
1.1%
1.1%
1.1%
1.0%
1.0%
1.0%
0.9%
0.9%
0.9%
0.9%
0.8%
0.8%
0.8%
0.8%
0.7%
0.7%
0.7%
0.7%
0.7%
0.6%
0.6%
0.6%
0.6%
0.6%
0.6%
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.3%
0.3%
0.3%
0.3%

0.372804
0.373256
0.373366
0.373153
0.372635
0.371831
0.370758
0.369432
0.367868
0.366082
0.364089
0.3619
0.359531
0.356992
0.354296
0.351455
0.348478
0.345377
0.342161
0.338839
0.33542
0.331913
0.328326
0.324666
0.320941
0.317157
0.313322
0.30944
0.30552
0.301565
0.297581
0.293573
0.289547
0.285506
0.281455
0.277397
0.273337
0.269279
0.265224
0.261178
0.257142
0.25312
0.249114
0.245127
0.24116

11.5963
11.96221
12.31766
12.66236
12.99604
13.31848
13.62952
13.92899
14.21679
14.49285
14.7571
15.00954
15.25015
15.47897
15.69604
15.90144
16.09524
16.27754
16.44848
16.60817
16.75677
16.89443
17.02132
17.13761
17.24349
17.33915
17.4248
17.50064
17.56687
17.62372
17.67141
17.71015
17.74017
17.7617
17.77496
17.78019
17.77762
17.76746
17.74996
17.72534
17.69384
17.65566
17.61105
17.56021
17.50338

77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121

7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5

0.102691
0.0997
0.096796
0.093977
0.09124
0.088582
0.086002
0.083497
0.081065
0.078704
0.076412
0.074186
0.072026
0.069928
0.067891
0.065914
0.063994
0.06213
0.06032
0.058563
0.056858
0.055202
0.053594
0.052033
0.050517
0.049046
0.047617
0.046231
0.044884
0.043577
0.042307
0.041075
0.039879
0.038717
0.03759
0.036495
0.035432
0.0344
0.033398
0.032425
0.031481
0.030564
0.029674
0.028809
0.02797

0.770185
0.747752
0.725973
0.704828
0.684299
0.664368
0.645018
0.626231
0.607991
0.590283
0.57309
0.556398
0.540192
0.524458
0.509183
0.494352
0.479954
0.465974
0.452402
0.439226
0.426433
0.414012
0.401954
0.390246
0.37888
0.367845
0.357131
0.346729
0.33663
0.326825
0.317306
0.308064
0.299091
0.29038
0.281922
0.273711
0.265739
0.257999
0.250484
0.243189
0.236105
0.229229
0.222552
0.21607
0.209777

0.3%
0.3%
0.3%
0.3%
0.3%
0.3%
0.3%
0.3%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%

0.237217
0.233299
0.229407
0.225545
0.221713
0.217913
0.214146
0.210414
0.206717
0.203057
0.199435
0.195852
0.192308
0.188805
0.185343
0.181922
0.178543
0.175206
0.171913
0.168663
0.165456
0.162293
0.159174
0.156099
0.153067
0.150081
0.147138
0.144239
0.141385
0.138574
0.135807
0.133084
0.130404
0.127767
0.125173
0.122622
0.120114
0.117647
0.115223
0.11284
0.110497
0.108196
0.105935
0.103714
0.101532

17.44078
17.37261
17.29908
17.22042
17.13683
17.04851
16.95565
16.85847
16.75715
16.65188
16.54284
16.43023
16.31422
16.19498
16.07269
15.94751
15.81961
15.68914
15.55626
15.42113
15.28389
15.14468
15.00364
14.86092
14.71664
14.57093
14.42392
14.27572
14.12646
13.97625
13.8252
13.67341
13.52099
13.36804
13.21466
13.06093
12.90695
12.75281
12.59859
12.44436
12.29021
12.13621
11.98244
11.82896
11.67583

122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166

7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5

0.027156
0.026365
0.025597
0.024851
0.024127
0.023425
0.022742
0.02208
0.021437
0.020812
0.020206
0.019618
0.019046
0.018492
0.017953
0.01743
0.016922
0.01643
0.015951
0.015486
0.015035
0.014597
0.014172
0.013759
0.013359
0.01297
0.012592
0.012225
0.011869
0.011523
0.011188
0.010862
0.010546
0.010238
0.00994
0.009651
0.00937
0.009097
0.008832
0.008574
0.008325
0.008082
0.007847
0.007618
0.007396

0.203667
0.197735
0.191975
0.186384
0.180955
0.175685
0.170568
0.1656
0.160776
0.156094
0.151547
0.147133
0.142848
0.138687
0.134648
0.130726
0.126918
0.123222
0.119633
0.116148
0.112765
0.109481
0.106292
0.103196
0.10019
0.097272
0.094439
0.091688
0.089018
0.086425
0.083908
0.081464
0.079091
0.076788
0.074551
0.07238
0.070272
0.068225
0.066238
0.064308
0.062435
0.060617
0.058851
0.057137
0.055473

0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%

0.099389
0.097285
0.09522
0.093192
0.091201
0.089248
0.087331
0.085449
0.083604
0.081793
0.080017
0.078275
0.076566
0.074891
0.073248
0.071638
0.070059
0.068511
0.066994
0.065508
0.064051
0.062623
0.061224
0.059854
0.058511
0.057196
0.055908
0.054646
0.053411
0.052201
0.051016
0.049856
0.04872
0.047608
0.04652
0.045454
0.044412
0.043391
0.042392
0.041415
0.040458
0.039522
0.038606
0.037711
0.036834

11.52313
11.3709
11.21922
11.06813
10.91769
10.76795
10.61895
10.47075
10.32339
10.1769
10.03133
9.886723
9.743102
9.600507
9.458967
9.318514
9.179176
9.040978
8.903946
8.768102
8.633468
8.500064
8.367909
8.237019
8.107411
7.979098
7.852095
7.726412
7.60206
7.47905
7.357388
7.237083
7.118142
7.000568
6.884367
6.769542
6.656095
6.544029
6.433343
6.324039
6.216115
6.10957
6.004402
5.900608
5.798185

167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200

7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
257.5

0.007181
0.006972
0.006769
0.006572
0.00638
0.006194
0.006014
0.005839
0.005669
0.005504
0.005343
0.005188
0.005037
0.00489
0.004747
0.004609
0.004475
0.004345
0.004218
0.004095
0.003976
0.00386
0.003748
0.003639
0.003533
0.00343
0.00333
0.003233
0.003139
0.003047
0.002958
0.002872
0.002789
0.002707

0.053857
0.052289
0.050766
0.049287
0.047852
0.046458
0.045105
0.043791
0.042515
0.041277
0.040075
0.038908
0.037774
0.036674
0.035606
0.034569
0.033562
0.032585
0.031635
0.030714
0.029819
0.028951
0.028108
0.027289
0.026494
0.025723
0.024973
0.024246
0.02354
0.022854
0.022189
0.021542
0.020915
0.69716

0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.3%

0.035977
0.035138
0.034318
0.033515
0.03273
0.031963
0.031212
0.030478
0.029761
0.029059
0.028373
0.027702
0.027046
0.026405
0.025779
0.025166
0.024567
0.023982
0.02341
0.022851
0.022305
0.021771
0.021249
0.02074
0.020242
0.019755
0.019279
0.018815
0.018361
0.017918
0.017485
0.017061
0.016648
0.557728
34.24038

5.697129
5.597435
5.499098
5.402113
5.306473
5.212172
5.119202
5.027557
4.937228
4.848207
4.760486
4.674055
4.588906
4.505027
4.422411
4.341046
4.260922
4.182029
4.104355
4.02789
3.952622
3.878539
3.805632
3.733886
3.663292
3.593836
3.525506
3.458291
3.392178
3.327155
3.263209
3.200329
3.1385
105.6681
2181.158

e 20-year issue?

analysis, assume that the 6% coupon bond will sell at par

onvexity

Semin Annual duration

Annual duration
Modified duration
Modified duration
Annual convexity

1/1/2000
1/1/2100
6%
4%
2 24.53486
24.05379

34.240
17.12
33.24309 Seminal
16.62154 Anual
545.2896

(Is a %)

The longer the duration, the higest the impact on the

price
Convexity prediction
Chage in yield (6% Change on price
Estimated Price
-1.00%
19.3%
$298.37
-0.50%
9.0%
$272.48
0.00%
0.0%
$250.00
0.50%
(7.6%) $230.93
1%
(13.9%) $215.26
1.50%
(18.8%) $203.01
2.00%
(22.3%) $194.16
2.50%
(24.5%) $188.72
3.00%
(25.3%) $186.68
3.50%
(24.8%) $188.06
4.00%
(22.9%) $192.84

60.0%
40.0%
20.0%
0.0%
-1.00%
(20.0%)

Axis Title

(40.0%)
(60.0%)
(80.0%)
(100.0%)
(120.0%)

-0.50%

0.00%

0.50%

-1.00%
(20.0%)

Axis Title

(40.0%)
(60.0%)
(80.0%)
(100.0%)
(120.0%)
(140.0%)

-0.50%

0.00%

0.50%

Anual

Duration annual
Mod dur
Y

-0.50%

0.00%

0.50%

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
1.00%
29
30
31

YTM
Weight

6.00%
Duration Convexity

CF
Factor
PV CF
-$86.02
7.5 0.970874 7.281553
8.5% 0.084645 0.159572
7.5 0.942596 7.069469
8.2%
0.16436 0.464774
7.5 0.915142 6.863562
8.0% 0.239359 0.902474
7.5 0.888487 6.663653
7.7% 0.309849 1.460314
7.5 0.862609 6.469566
7.5% 0.376031 2.126671
7.5 0.837484 6.281132
7.3% 0.438094 2.89062
7.5 0.813092 6.098186
7.1% 0.496223 3.741903
7.5 0.789409 5.920569
6.9% 0.550594 4.670892
7.5 0.766417 5.748125
6.7% 0.601377 5.668558
7.5 0.744094 5.580704
6.5% 0.648735 6.726444
7.5 0.722421 5.41816
6.3% 0.692824 7.836634
7.5 0.70138 5.260349
6.1% 0.733794 8.991725
7.5 0.680951 5.107135
5.9%
0.77179 10.1848
7.5 0.661118 4.958384
5.8%
0.80695 11.40941
7.5 0.641862 4.813965
5.6% 0.839407 12.65954
7.5 0.623167 4.673752
5.4% 0.869289 13.92959
7.5 0.605016 4.537623
5.3% 0.896718 15.21436
7.5 0.587395 4.40546
5.1% 0.921811 16.50902
7.5 0.570286 4.277145
5.0% 0.944683 17.80908
7.5 0.553676 4.152568
4.8%
0.96544 19.11041
7.5 0.537549 4.03162
4.7% 0.984186 20.40917
7.5 0.521893 3.914194
4.6% 1.001021 21.70185
7.5 0.506692 3.800188
4.4% 1.016041 22.98519
7.5 0.491934 3.689503
4.3% 1.029337 24.25621
7.5 0.477606 3.582042
4.2% 1.040996 25.5122
7.5 0.463695 3.47771
4.0% 1.051103 26.75065
7.5 0.450189 3.376418
3.9% 1.059737 27.96932
0.437077
3.8%
1.066978 29.16613
1.50%7.52.00%
2.50%3.278076
3.00% 3.50%
4.00%
7.5 0.424346 3.182598
3.7% 1.072897 30.33925
7.5 0.411987 3.089901
3.6% 1.077566
31.487
100yr
7.5 0.399987 2.999904
3.5% 1.081054 32.6079
20yr

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

100yr

32
33
34
35
36
37
Axis Title
38
39
40

7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5
7.5

0.388337
0.377026
0.366045
0.355383
0.345032
0.334983
0.325226
0.315754
0.306557

2.912528
2.827697
2.745337
2.665375
2.587743
2.512372
2.439196
2.368152
2.299176

3.4%
3.3%
3.2%
3.1%
3.0%
2.9%
2.8%
2.8%
2.7%

1.083424
1.084739
1.085058
1.084438
1.082934
1.080598
1.077479
1.073624
1.069081
33.55426

20yr

33.70062
34.76399
35.79698
36.79873
37.76846
38.70554
39.60945
40.47976
41.31616
794.5913

onvexity

Semin Annual duration

Annual duration
Modified duration
Modified duration
Annual convexity

Chage in yield

33.554
16.78
32.57695 Seminal
16.28848 Anual
198.6478

Change on Price
-1.00%
32.7%
$114.12
-0.50%
16.3%
$100.05
0.00%
0.0%
$86.02
0.50%
(16.3%)
$72.03
1%
(32.5%)
$58.07
1.50%
(48.7%)
$44.15
2.00%
(64.8%)
$30.26
2.50%
(80.9%)
$16.40
3.00%
(97.0%)
$2.58
3.50% (113.0%)
-$11.20
4.00% (129.0%)
-$24.95