04 May FIN 353 Project InstructionsTurn in one copy per group. Submit pr
FIN 353 Project InstructionsTurn in one copy per group. Submit project via ilearn on activity called Project Report.The instructions are to include all the project exercises into a professional word document.For Part I please copy and paste all figures and tables from questions 1 through 7. Inaddition, each group must include an interpretation below each figure and table. Afterproviding all the tables and figures and at least two sentences interpreting graph include asummary conclusion of your opinion on the direction of the US economy. Tip: Please do notdefine the graph but provide an interpretation. For example, suppose you include a graphof the yield curve. Do not define what the yield curve is by saying ”it is a map of all theTreasury yields”. However, say something like this, ”it is downward sloping which mean themarket expects interest rates to decline in the next 12 months suggesting a large probabilityof an economic recession.”For Part II each group only has to include whether Goldman Sachs is over, under, or fairlyvalued for question 9. For question 10 just note if the put/call parity holds for GoldmanSachs. Include the equations with numbers used in the project report.11 Part I1. Calculate annual 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 rateof the loans updating on a monthly basis. Graph the year over year change updatingon a monthly basis. Calculate the average growth rate from 1970 until today. Includethe average on the graph along with the growth rate.2. Find Household Debt Service Payments as a Percent of Disposable Personal Income• Google ”household debt service payments as a percent of disposable personal incomeand Fed”.• Click the St. Louis Fed link.• Download data and graph.• Calculate the annual percent change updating on a quarterly basis. Graph the changeas well.3. Calculate real growth rate of money supply• Google M2 Fed. Click on first link. Click Monthly Non-Seasonally Adjusted. Downloadfrom 1970 to the most recent date. Calculate the annual growth of M2 stock updatingon a monthly basis.• Google CPI Index Fed. Click on first link. Click on Non-Seasonally Adjusted underConsumer Price Index for All Urban Consumers: All Items. Download from 1970 tothe most recent date. Calculate the annual growth rate of CPI index updating on amonthly basis.• Subtract the difference between the M2 and CPI growth rate to calculate the realgrowth rate in M2.• Calculate the four year moving average of the real growth rate in M2.2• Plot the real growth in M2 and its moving average.4. Calculate Fed’s monetary base adjusting for excess reserves.• Google Monetary Base Fed. Click on first link. Click Monthly Non-Seasonally Adjusted. Download from 1984 to the most recent date.• Google excess reserves Fed. Download from 1984 to the most recent date.• Subtract the two and Graph.5. Calculate Baa-Aaa spread.• Google Baa Fed. Click first link and download data from 1970 to the most recent date.• Do the same for Aaa Fed.• Subtract the two and graph.• Subtract the two and divide by the Aaa yield and graph.6. Calculate yield curve• Find the closing yields for all Treasury securities.• Copy and paste the yields to Excel and graph the Treasury Yield Curve.7. Calculate bid to cover ratio for 10 year Treasuries.• Calculate the bid to cover ratio for 10-year Treasury auctions for every month of thisyear.• Google bid to cover ratio treasury auction results. Select first Treasury direct link youfind.• Click Announcement and Press Release. Click Note and 10 year. Click pdf undercompetitive results for all years.• Collect all data for this year and chart.38. Write one paragraph that is a forecast of the US economy. What is the direction of the USeconomy in the next 12 months after netting the results from the previous seven questions?What is the direction of interest rates and inflation?42 Part II9. Evaluate the stock price of Goldman Sachs using two techniques.• DDM• Relative ValuationCreate a nice formatted table in Excel that shows all the steps/work. Copy and paste thetable into your professional Word Document1. To calculate g use two methods. 1. Use ROE x (1-payout ratio). 2. Go to yahoofinance enter GS. Click on the ”Analysts” link. Use next 5 years growth estimate. Tofind the data go to yahoo finance. Enter GS for the ticker. Click on statistics. Choosethe go you think is the most appropriate to use. To calculate r use the CAPM, 10 yearTreasury yield + beta * (7.6%). Use the forwarded annual dividend rate.2. To use the relative valuation approach use google finance. Use the P/E, P/BV, andP/S ratios of the related companies.3. Determine if GS over or under valued using both techniques.10. Use put-call ratio.• Determine if GS’s put/call parity holds. Go to yahoo finance. Enter GS in tickersearch box. Click on options. Find the date that is closes to one year from today.• Find the call and put premium for a strike price that is close to GS’s current price.• Find the yield on a one year Treasury bill.• Determine if the put/call parity holds using the equation.3 Tips1. The Word document should look professional similar to what a financial institutionsends to a client. I will take points off if the document is not professional.52. Include the graphs and tables only in the Word document. Do not copy and paste allthe data you download.3. In Part I remember to write down the current growth rate level and compare it to thehistorical or moving average.4. For Part II, include a nicely formated Excel table. The only words required for PartII is if GS is over, under, or fairly valued and if the put/call parity holds.6
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