Expert answer:I want help on a research paper
Answer & Explanation:I have a research paper due in 4 days that I really don’t have time to do. My professor is a very lenient grader and the paper doesn’t have to be perfect. Just need something that matches the description of his instructions. Again it doesn’t have to be detailed and perfect, Im pretty sure my professor wont read it. just need something to turn in, I have attached the instructions of said research paperProject information FIN4502_reportInstructions (1).docx
fin4502_reportinstructions__1_.docx
fin4502_reportinstructions__1_.docx
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Project Instructions
Background
Congratulations! You’ve just been hired as an analyst at a large investment institution. Your department
analyzes and creates portfolios for large institutional investors. Your first big project is to find out whether the
company you’ve been assigned is over- or under- priced. Since your fresh out of school, you know exactly what to
do!
You know that the price of the stock is just the present value of all the expected future cash flows.
Therefore, there are two big inputs you need to know when modeling the price of the stock: 1) the expected
dividends and 2) the interest rate at which you discount.
These two inputs depend on the general business climate, so the first thing you will do is to analyze the
macro-economy and the specific industry in which the firm operates. Once you have a feel for the big picture you
will then use use CAPM find an estimate of the discount rate and use equity valuation models to estimate the
expected future dividends and price of the stock.
Objectives
The primary goal of this project is to internalize the various models and intuitions developed in the course. There is
no substitute for getting your hands dirty when you learn. Additionally, the process of analyzing and creating the
final report will help you in your professional life.
Formatting Instructions
Please submit in your report, including graphs and table, as a Word document and your calculations as an
Excel file. Your report should look professional and grammar, format, clarity, flow of ideas, etc. will be graded.
Remember, your boss will see it and you’d like to make a good impression!
Use 10pt Times New Roman, single space, and one inch margins. For the questions in the first part below
do NOT type more than a half page for each question. I will not read more than half of the page (quality NOT
quantity!). However, do not give “yes or no answers” with only two lines of explanation. Do not repeat what your
resource says, but always explain the information with your own words. I want to see your reasoning skills and
communication skills.
Use primary resources. DO NOT present any view from a secondary source, or another paper, project,
analysis, etc. unless the question asks for it. If you feel stuck using Word or Excel, use “Help”, google, or search
YouTube for help. Use other resources a well. Part of the objectives are to help teach you to research things when
you’re stuck.
Project Instructions
Choose a stock to analyze (the first letter of the stock and your name should match) that has paid dividends
consistently and traded in the market for more than 5 years.
I.
1)
2)
3)
4)
5)
Macroeconomic and Industry Analysis (Word file)
What is the annual US GDP growth rate over the past 10-year period (2004-2014)?
What is the inflation rate over the past 10-year period (2004-2014)? Explain the inflation rate.
What is the unemployment rate over the past 10-year period (2004-2014)? Explain the unemployment rate.
What years are recession years during past 10 years?
What are the economists’ forecast for unemployment, GDP growth, and inflation?
a) Visit WSJ Forecasts, scroll down and to the left hand side you should a link that says “download data for
August 2015”
b) Use a forecast horizon of one year ahead. What do you think about individual forecasts and the average
of them?
6) What is your prediction for the above variables? Do you expect more or less than the average forecasts?
Explain you reasoning.
7) How do these variables (GDP growth, unemployment rate, and inflation rate) relate to stock market return?
(Your own brief opinion only)
8) Summarize the key statistics (values and definitions) for your stock and its industry.
a) Choose 8 items you believe informative, such as P/E ratio, market capitalization, dividend yield, ROE,
sales, etc. These do not have to be perfect, and can be anything that makes sense, what I’m looking for is
your contribution.
b) Look at the “Key Statistics” on your stock’s page at finance.yahoo.com.
9) Write the interpretation and conclusion of your Valuation Analysis
a) See Steps 7g. and 9
10) a References page so that I know where you got your information. Failure to do so will be taken off points
from your project. Project will be checked for plagiarism. Do not fail to report the resources you refer to.
II.
Valuation Analysis (Excel file)
1) Download stock price information
a) Go to finance.yahoo.com and type your company’s name in the “get quotes” box.
b) From the list, click on “Historical Prices”.
c) Choose MONTHLY Historical prices for the past 5 years.
d) On the bottom of the next page, & click on “Download to spread sheet” to save your data.
e) In the downloaded file, USE ONLY the first and last column (date/adj close), delete other columns.
2) Download market (S&P 500) index prices information
a) From the finance.yahoo.com page, under the “Investing tab”, click on “Market stats”.
b) From the list on the left, click on US. Then, in the middle of the page, choose S&P500 from the S&P tab.
c) Now download the S&P monthly prices by following the same steps in Step 1.
3) Download the risk-free (3-month T-bill) rates
a) Go to http://research.stlouisfed.org/fred2/series/TB3MS
b) Clicking on, the “monthly” frequency, would give you the TB rates from 1934 to 2014.
c) Save this file.
d) NOTE: These rates are annualized, therefore you have to divide the series by 12 to generate monthly Tbill rate in percent. Now divide by 100 to get it into decimal form. This is your risk-free rate.
4) Merge the files from the previous steps
a) Make sure that the dates in both files match before you merge. Delete any row with missing observations.
5) Calculate the rates of return for the stock and S&P 500 index prices
a) Use the following formulas to find the return: = − 1 or = ln( ) − ln( −1 )
−1
6) Now find the excess returns: (R-Rf) and (Rm-Rf)
7) To find the beta, run a regression of (R-Rf) on (Rm-Rf): − = ( − ).
a) From the excel dropdown menu, click on Tools, then Add-ins.
b) Then choose “Analysis Toolpack” and click ok.
c) Excel will start installing the “Analysis toolpack” keep your Microsoft office CD ready.
d) Click on Tools, “Data Analysis”. Then choose, “Regression”, and click Ok.
e) In the “input Y range”, enter the (R-Rf) column, & in the “out X range” enter the (Rm-Rf).
f) From the “Options” tab in the regression dialog box, set the intercept/constant value to zero.
g) From the summary output, in the 3rd (lowest) table, you will find the beta coefficient under the title
coefficient in the second row, next to X-Variable. Report your results in question 9: interpret the
coefficients, t-statistics and R2.
h) Using the calculated beta, we can now estimate the expected rate of return on the stock using the CAPM:
= + ( − ).
8) Using the beta calculated in Step 7, estimate the discount rate (see pg. 208)
a) Use beta you estimated as given
b) Download 20 years worth of annual data on the S&P 500 to find the average annual excess return on the
market
c) Download 20 years worth of data for the 3-month T-bills to calculate the average annual risk-free rate
d) Using the average annual risk-free rate ( ) and the average annual excess return of the stock ( − )
and plug into the CAPM formula to estimate the discount rate.
9) Find the price of the stock
a) Value the stock using the dividend discount model (see Chapter 13)
b) Clearly summarize your report and explain your main results (not more than 2 pages). This corresponds to
question 9 from I. Macroeconomic and Industry Analysis
i) Compare your estimation with the current stock price, show whether the stock is undervalued or
overvalued and determine your trading strategy based on your estimation, etc.
References:
Wall Street Journal @ http://projects.wsj.com/econforecast/ – ind=gdp&r=20
Chapter 1, 12 in Bodie, Kane, and Marcus for Part I
Chapter 5, 6, 7, 13, 14 in Bodie, Kane, and Marcus for Part II
Yahoo Finance @ http://finance.yahoo.com/
Economic data-FRED ® @ http://research.stlouisfed.org/fred2/
Economic Report of the President @ https://www.whitehouse.gov/administration/eop/cea/economic-report-ofthe-President
Federal Reserve Bulletin @ http://www.federalreserve.gov/monetarypolicy/beigebook/beigebook2014.htm
Survey of Current Business @ http://www.bea.gov/scb/index.htm
Humphrey Hawkins Testimony and Report @ http://www.federalreserve.gov/boarddocs/hh/
NOTE: Late reports without pre-approval from the instructor will receive no credit.
Project Instructions
Background
Congratulations! You’ve just been hired as an analyst at a large investment institution. Your department
analyzes and creates portfolios for large institutional investors. Your first big project is to find out whether the
company you’ve been assigned is over- or under- priced. Since your fresh out of school, you know exactly what to
do!
You know that the price of the stock is just the present value of all the expected future cash flows.
Therefore, there are two big inputs you need to know when modeling the price of the stock: 1) the expected
dividends and 2) the interest rate at which you discount.
These two inputs depend on the general business climate, so the first thing you will do is to analyze the
macro-economy and the specific industry in which the firm operates. Once you have a feel for the big picture you
will then use use CAPM find an estimate of the discount rate and use equity valuation models to estimate the
expected future dividends and price of the stock.
Objectives
The primary goal of this project is to internalize the various models and intuitions developed in the course. There is
no substitute for getting your hands dirty when you learn. Additionally, the process of analyzing and creating the
final report will help you in your professional life.
Formatting Instructions
Please submit in your report, including graphs and table, as a Word document and your calculations as an
Excel file. Your report should look professional and grammar, format, clarity, flow of ideas, etc. will be graded.
Remember, your boss will see it and you’d like to make a good impression!
Use 10pt Times New Roman, single space, and one inch margins. For the questions in the first part below
do NOT type more than a half page for each question. I will not read more than half of the page (quality NOT
quantity!). However, do not give “yes or no answers” with only two lines of explanation. Do not repeat what your
resource says, but always explain the information with your own words. I want to see your reasoning skills and
communication skills.
Use primary resources. DO NOT present any view from a secondary source, or another paper, project,
analysis, etc. unless the question asks for it. If you feel stuck using Word or Excel, use “Help”, google, or search
YouTube for help. Use other resources a well. Part of the objectives are to help teach you to research things when
you’re stuck.
Project Instructions
Choose a stock to analyze (the first letter of the stock and your name should match) that has paid dividends
consistently and traded in the market for more than 5 years.
I.
1)
2)
3)
4)
5)
Macroeconomic and Industry Analysis (Word file)
What is the annual US GDP growth rate over the past 10-year period (2004-2014)?
What is the inflation rate over the past 10-year period (2004-2014)? Explain the inflation rate.
What is the unemployment rate over the past 10-year period (2004-2014)? Explain the unemployment rate.
What years are recession years during past 10 years?
What are the economists’ forecast for unemployment, GDP growth, and inflation?
a) Visit WSJ Forecasts, scroll down and to the left hand side you should a link that says “download data for
August 2015”
b) Use a forecast horizon of one year ahead. What do you think about individual forecasts and the average
of them?
6) What is your prediction for the above variables? Do you expect more or less than the average forecasts?
Explain you reasoning.
7) How do these variables (GDP growth, unemployment rate, and inflation rate) relate to stock market return?
(Your own brief opinion only)
8) Summarize the key statistics (values and definitions) for your stock and its industry.
a) Choose 8 items you believe informative, such as P/E ratio, market capitalization, dividend yield, ROE,
sales, etc. These do not have to be perfect, and can be anything that makes sense, what I’m looking for is
your contribution.
b) Look at the “Key Statistics” on your stock’s page at finance.yahoo.com.
9) Write the interpretation and conclusion of your Valuation Analysis
a) See Steps 7g. and 9
10) a References page so that I know where you got your information. Failure to do so will be taken off points
from your project. Project will be checked for plagiarism. Do not fail to report the resources you refer to.
II.
Valuation Analysis (Excel file)
1) Download stock price information
a) Go to finance.yahoo.com and type your company’s name in the “get quotes” box.
b) From the list, click on “Historical Prices”.
c) Choose MONTHLY Historical prices for the past 5 years.
d) On the bottom of the next page, & click on “Download to spread sheet” to save your data.
e) In the downloaded file, USE ONLY the first and last column (date/adj close), delete other columns.
2) Download market (S&P 500) index prices information
a) From the finance.yahoo.com page, under the “Investing tab”, click on “Market stats”.
b) From the list on the left, click on US. Then, in the middle of the page, choose S&P500 from the S&P tab.
c) Now download the S&P monthly prices by following the same steps in Step 1.
3) Download the risk-free (3-month T-bill) rates
a) Go to http://research.stlouisfed.org/fred2/series/TB3MS
b) Clicking on, the “monthly” frequency, would give you the TB rates from 1934 to 2014.
c) Save this file.
d) NOTE: These rates are annualized, therefore you have to divide the series by 12 to generate monthly Tbill rate in percent. Now divide by 100 to get it into decimal form. This is your risk-free rate.
4) Merge the files from the previous steps
a) Make sure that the dates in both files match before you merge. Delete any row with missing observations.
5) Calculate the rates of return for the stock and S&P 500 index prices
a) Use the following formulas to find the return: = − 1 or = ln( ) − ln( −1 )
−1
6) Now find the excess returns: (R-Rf) and (Rm-Rf)
7) To find the beta, run a regression of (R-Rf) on (Rm-Rf): − = ( − ).
a) From the excel dropdown menu, click on Tools, then Add-ins.
b) Then choose “Analysis Toolpack” and click ok.
c) Excel will start installing the “Analysis toolpack” keep your Microsoft office CD ready.
d) Click on Tools, “Data Analysis”. Then choose, “Regression”, and click Ok.
e) In the “input Y range”, enter the (R-Rf) column, & in the “out X range” enter the (Rm-Rf).
f) From the “Options” tab in the regression dialog box, set the intercept/constant value to zero.
g) From the summary output, in the 3rd (lowest) table, you will find the beta coefficient under the title
coefficient in the second row, next to X-Variable. Report your results in question 9: interpret the
coefficients, t-statistics and R2.
h) Using the calculated beta, we can now estimate the expected rate of return on the stock using the CAPM:
= + ( − ).
8) Using the beta calculated in Step 7, estimate the discount rate (see pg. 208)
a) Use beta you estimated as given
b) Download 20 years worth of annual data on the S&P 500 to find the average annual excess return on the
market
c) Download 20 years worth of data for the 3-month T-bills to calculate the average annual risk-free rate
d) Using the average annual risk-free rate ( ) and the average annual excess return of the stock ( − )
and plug into the CAPM formula to estimate the discount rate.
9) Find the price of the stock
a) Value the stock using the dividend discount model (see Chapter 13)
b) Clearly summarize your report and explain your main results (not more than 2 pages). This corresponds to
question 9 from I. Macroeconomic and Industry Analysis
i) Compare your estimation with the current stock price, show whether the stock is undervalued or
overvalued and determine your trading strategy based on your estimation, etc.
References:
Wall Street Journal @ http://projects.wsj.com/econforecast/ – ind=gdp&r=20
Chapter 1, 12 in Bodie, Kane, and Marcus for Part I
Chapter 5, 6, 7, 13, 14 in Bodie, Kane, and Marcus for Part II
Yahoo Finance @ http://finance.yahoo.com/
Economic data-FRED ® @ http://research.stlouisfed.org/fred2/
Economic Report of the President @ https://www.whitehouse.gov/administration/eop/cea/economic-report-ofthe-President
Federal Reserve Bulletin @ http://www.federalreserve.gov/monetarypolicy/beigebook/beigebook2014.htm
Survey of Current Business @ http://www.bea.gov/scb/index.htm
Humphrey Hawkins Testimony and Report @ http://www.federalreserve.gov/boarddocs/hh/
NOTE: Late reports without pre-approval from the instructor will receive no credit.
…
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