Project #87751 - Project!! FINC

As indicated in the syllabus, you should now be familiar with the web site from which you will copy the data needed to prepare the report for this project. You must work together in the groups formed at the beginning of the semester for this project.

Visit the following Federal Reserve web site to access interest rate (yield) information for U.S. government securities and corporate bonds.

http://www.federalreserve.gov/releases/H15/data.htm

The assignment consists of two separate sections:

Part 1

Copy the yield on U.S. government securities (Treasury constant maturities) from the monthly data files for 10 years, 2004 - 2013. Students belonging to Group 1 must use the February data, Group 2 members use the March data, Group 3 members use May data, Group 4 members the use August data, Group 5 members use September data, and Group 6 members the use November data for each of the 10 years. Copy the 3-month, 6- month, 1-year, 3-year, 5-year, 10-year, 20-year, and 30-year yields. All groups should copy eight different yields for each of the 10 years. This should result in sufficient data for a total of 10 yield curves (one per year) for each group.

Use Excel to plot the yield curves for each of the 10 years. Prepare a report that includes tables with the raw data you copied and graphs that depict the term structure of interest rates. The narrative portion of the report should describe the shape of the yield curves, compare the curves, and include a plausible explanation for the shape of the curves.

Part 2

Copy the monthly yields for corporate bonds with Moody’s seasoned ratings of Aaa and Baa, and Treasury constant maturities 10-year bonds from January 2004 through December 2013. This should yield three series of data; one for 10-year Treasury bonds, one for Aaa corporate bonds, and one for Baa corporate bonds.

Plot all three series on the same graph using the 2004- 2013 data. Describe the graphs and explain any differences or similarities.

The report must be typed, 12 point print, double-spaced on numbered pages. The narrative portion of the report should be between 4 and 6 pages. Add a cover page, which lists the course title and number, group number, names of students that prepare the report, and the due date.

This report is due by 11:59 p.m. on Monday, Monday, October 26, 2015. Students who turn in a late report surrender five points per day or part thereof for each day the report is late. All members of a group that fails to turn in their report on time will be treated equally.

Each student should retain a copy of the final report as the learning outcomes assessment assignment, which students must do individually will, in part, be based on the class project.

page1image26376

1

 

Group members are expected to participate equally on this project. However, to mitigate a free-rider problem, the grade awarded to each student for this project shall consist to two parts. Fifty percent of the grade is based on the instructor’s evaluation of the project. The other fifty percent is based on how each group member allocates a pool of funds to individual members.

Here is an illustration of how the system operates for a group consisting of four students. Each group member receives $200,000 ($50,000 for each member in the group) to be divided among the four members of the group based on that member’s assessment of how much each colleague contributed to the group effort. Each group member should allocate the $200,000, as they deem appropriate. Please note that each student would receive $150,000 if the group consisted of three members. Now let’s get back to the group with four members. If a group member (Student 2) believed that the contribution was equal among the group members then that member pays $50,000 to each member. This is how the system works in practice, when the other members of the group believe that Student 2 has failed to complete his/her responsibilities in a timely fashion and is habitually absent from group meetings. These other group members will therefore, not allocate their allotted $200,000 equally. Assume that the instructor assesses a score of 90 points for the project and group members make the cash payments as indicated in the columns below.

Payments received by each student for their contribution to the project are recorded in the rows. One half of the grade is the raw score so each student in this group receives 45 points. The other fifty percent of the grade (45 points in this case) is allocated, according to the assessment of the group members, as follows:

Student 1: 45 x 214,000/200,000 = 48.150, so Student 1 receives a score of 45 + 48 = 93 points Student 2: 45 x 135,000/200,000 = 30.375, so Student 2 receives a score of 45 + 30 = 75 points Student 3: 45 x 228,000/200,000 = 51.300, so Student 3 receives a score of 45 + 51 = 96 points Student 4: 45 x 223,000/200,000 = 50.175, so Student 4 receives a score of 45 + 50 = 95 points

This methodology may seem a bit complicated but as I am sure you appreciate, it is intended to deter the type behavior attributed to Student 2.

The final report is due at the beginning of class on Monday, October 26, 2015.

Good luck.

 

Student 1 pays

Student 2 pays

Student 3 pays

Student 4 pays

page2image27808

Total received

Student 1 receives

$55,000

page2image31824

$50,000

$55,000

page2image33608

$54,000

page2image34784

$214,000

Student 2 receives

$30,000

page2image38816

$50,000

$27,000

page2image40600

$28,000

page2image41776

$135,000

Student 3 receives

$60,000

page2image45808

$50,000

$60,000

page2image47592

$58,000

page2image48768

$228,000

Student 4 receives

$55,000

page2image52800

$50,000

$58,000

page2image54584

$60,000

page2image55760

$223,000

Total paid

$200,000

page2image60792 page2image61376

$200,000

$200,000

page2image63432 page2image63856

$200,000

page2image65040 page2image65624

$800,000

 

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Due By (Pacific Time) 10/21/2015 02:30 pm
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