Project Assignment
Project Exercise 1
1. Find growth rate of commercial and industrial loans.
Google "commercial and industrial loans fed". Download monthly non-seasonally data. Use start date of January 1970. Download the data. Calculate the annual growth rate of the loans updating on a monthly basis. Graph the year over year change for every month. Then calculate the sample mean. Graph the sample mean on the same graph.
2. Find Household Debt Service Payments as a Percent of Disposable Personal Income
• Google "household debt service payments as a percent of disposable personal income and Fed"'.
• Click the St. Louis Fed link.
• Download the data and graph the data in Excel.
• Calculate the annual growth rate on a quarterly basis and its two year moving average.
3. Find real growth rate in money supply.
• Google M2 Fed. Click on first link. Click Monthly Non-Seasonally Adjusted. Download from 1970 to the present. Calculate the annual growth of M2 stock updating on a monthly basis.
• Google CPI Index Fed. Click on first link. Click on monthly Non-Seasonally Adjusted under Consumer Price Index for All Urban Consumers: All Items. Download from 1970 to the present. Calculate the annual growth rate of CPI index updating on a monthly basis.
• Subtract the difference between the M2 and CPI growth rate to calculate the real growth rate in M2.
• Calculate the four year moving average of the real growth rate in M2.
• Plot the real growth in M2 and its 4 year-moving average.
Project Exercise 2
1. Find Fed monetary base.
1. Google Monetary Base Fed. Click on first link. Click Monthly Non-Seasonally Ad¬justed. Download from 1984 to most recent date.
2. Google excess reserved Fed. Download from 1984 to most recent date.
3. Make sure each time series uses the same units. Subtract the two and Graph.
2. Find Baa-Aaa spread. Baa and A as bonds are corporate bonds. Baa is lower quality and Aaa is higher quality.
1. Google Baa Fed. Click first link and download data from 1970 to most recent date. Use monthly data.
2. Do the same far Aaa Fed.
3. Subtract the two and graph.
4. Subtract the two and divide by the Aaa yield and graph.
3. Find Treasury Yield Curve
Find the closing yiekls for all Treasury securities ONLY for the most recent date, TODAY,
1. Google Treasury yields and click the first link.
2. Copy and paste the yields and maturities to Excel and graph the lieasury Yield Curve.
4. Find Bid to Cover Ratio for 10-year Treasury auction for eNery month in the current year.
1. Google bid to coNer ratio treasury auction results. Select first Treasury direct link you find.
2. Clidc Announcement and Press Release. Click Note and 10 year. Click pdf under competitive results for eadi month.
3. Collect all data far the current year and chart.
Project Exercise 3
1. Evaluate the stock price of Apple using two techniques. One stock must pay dividends to use Dividend Discount Model.
• DDM
• Relative Valuation
Go to yahoo finance. Enter the ticker AAPL.
1. D1 = Forward Dividend found on the summary page of yahoo finance.
2. To find g, go to yahoo finance and click on the "Analysis" link. Use next 5 years growth estimate.
3. To calculate r use the CAPM assuming the equity risk premium is 7.6%:
CAPM = ri = 10 year Treasury yield + beta * (7.6%).
Then calculate the model price using the DDM:
V = D1 / (r - g) (1)
4. To use the relative valuation approach find the P/E, P/BV, and P/S ratios of 2 to 3 related companies. Do not use Apple's ratios. Use the comparables example we did in class to help.
Table 1: Comparables Table 1
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Ratio
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Peer1
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Peer2
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Peer3
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Mean
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P/E
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P/BV
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P/S
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Table 2: Comparables Table 2
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Metric
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Apple's Metric
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Industry Avg. (P/E/, P/B, P/S)
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Stock Estimate
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EPS
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BV/Share
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Sales/Share
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Mean
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5. Determine if Apple over or under valued using both techniques.
2.
1. Determine if Apple's put/call parity holds. Go to yahoo finance. Enter APPL in ticker search box. Click on options. Find the date that is closest to one year from today.
2. Find the call (C) and put (P) premium for a strike price (X) that is close to Apple's current price (S).
3. Find the yield on a one year Treasury bill, (r)
4. Determine if the put/call parity holds using the equation. Each side of the equation should be equal of one can make a riskless profit. (Probably off by a dollar or two per share.)
C + X / (1 + r)t = P + S (2)
• C = call option price,
• P = put option price,
• S = the current stock price,
• X = the strike price at maturity,
• r = the Treasury yield,
• t = the time to maturity,
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.