The excel file – Only complete the November part 6. Measuring and explaining pre

The excel file – Only complete the November part
6. Measuring and explaining premiums on money market securities (from Chapter 6)
a. What is the difference between the yield on 90-day commercial paper and the yield on 13-week T-bills as of the end of the school term? Apply the concepts discussed in Chapter 6 to explain why this premium exists.
b. Compare the premium on the 90-day commercial paper yield (relative to the 13-week T-bill yield) that exists at the end of the school term to the premium that existed at the beginning of the term. Apply the concepts discussed in Chapter 6 to explain why the premium may have changed over the school term.
7. Explaining bond premiums and price movements (from Chapter 8)
a. What is the difference between the yield on high-yield corporate bonds at the end of the school term versus the yield on high-quality corporate bonds as of the beginning of the school term? Apply the concepts discussed in Chapter 8 to explain why this premium exists.
b. Compare the long-term Treasury bond yield at the end of the school term to the long-term Treasury bond yield that existed at the beginning of the school term. Given the direction of this change, did prices of long-term bonds rise or fall over the school term?
c. Compare the change in the yields of Treasury, municipal, and corporate bonds over the school term. Did the yields of all three types of securities move in the same direction and by about the same degree? Apply the concepts discussed in Chapter 8 to explain why yields of different types of bonds move together.
d. Compare the premium on high-yield corporate bonds (relative to Treasury bonds) at the beginning of the school term to the premium that existed at the end of the school term. Did the premium increase or decrease? Apply the concepts discussed in Chapter 8 to explain why this premium changed over the school term.
8. Explaining mortgage rates (from Chapter 9)
a. Compare the rate paid by a homeowner on a 30-year mortgage to the rate (yield) paid by the Treasury on long-term Treasury bonds as of the end of the school term. Explain the difference.
b. Compare the 30-year mortgage rate at the end of the school term to the 30-year mortgage rate that existed at the beginning of the school term. What do you think is the primary reason for the change in 30-year mortgage rates over the school term?
9. Explaining stock price movements (from Chapter 11)
a. Determine the return on the stock market over your school term, based on the percentage change in the S&P 500 index level over the term. Annualize this return by multiplying the return times (12/m), where m is the number of months in your school term. Apply concepts discussed in Chapter 11 to explain why the market return was high or low over your school term.
b. Repeat the previous question for smaller stocks by using the Nasdaq Composite instead of the S&P 500 index. What was the annualized return on the Nasdaq Composite over your school term?
c. Explain why the return on the Nasdaq Composite was high or low over your school term.
d. Determine the return over the school term on the stock in which you chose to invest. The return is (Pt – Pt–1 + D)/Pt–1, where Pt is the stock price as of the end of the school term, Pt–1 is the stock price at the beginning of the school term, and D is the dividend paid over the school term. In most cases, one quarterly dividend is paid over a school term, which is one-fourth of the annual dividend amount per share shown in stock quotation tables.
e. What was your return over the school term on the stock you selected from the New York Stock Exchange? What was your return over the school term on the stock you selected from the Nasdaq market? Apply the concepts discussed in Chapter 11 to explain why you think these three stocks experienced different returns over the school term.
10. Measuring and explaining futures price movements (from Chapter 13)
a. Assume that you purchased an S&P 500 futures contract at the beginning of the school term, with the first settlement date beyond the end of the school term. Also assume that you sold an S&P 500 futures contract with this same settlement date at the end of the school term. Given that this contract has a value of the futures price times $250, determine the difference between the dollar value of the contract you sold and the dollar amount of the contract that you purchased.
b. Assume that you invested an initial margin of 20 percent of the amount that you would owe to purchase the S&P 500 index at the settlement date. Measure your return from taking a position in the S&P 500 index futures as follows. Take the difference determined in the previous question (which represents the dollar amount of the gain on the futures position), and divide it by the amount you originally invested (the amount you originally invested is 20 percent of the dollar value of the futures contract that you purchased).
c. The return that you just derived in the previous question is not annualized. To annualize your return, multiply it by (12/m), where m is the number of months in your school term.
d. Apply the concepts discussed in Chapter 13 to explain why your return on your S&P 500 index futures position was low or high over the school term.
e. Assume that you purchased a Treasury bond futures contract at the beginning of the school term with the first settlement date beyond the end of the school term. Also assume that you sold this same type of futures contract at the end of the school term. Recall that Treasury bond futures contracts are priced relative to a $100,000 face value, and the fractions are in thirty-seconds. What was the dollar value of the futures contract at the beginning of the school term when you purchased it?
f. What was the dollar value of the Treasury bond futures contract at the end of the school term when you sold it?
g. What was the difference between the dollar value of the Treasury bond futures contract when you sold it and the value when you purchased it?
h. Assume that you invested an initial margin of 20 percent of the amount that you would owe to purchase the Treasury bonds at the settlement date. Your investment is equal to 20 percent of the dollar value of the Treasury bond futures contract as of the time you purchased the futures. Determine the return on your futures position, which is the difference you derived in the previous question as a percentage of your investment.
i. The return that you just derived in the previous question is not annualized. To annualize your return, multiply your return times (12/m), where m is the number of months in your school term.
j. Apply the concepts discussed in Chapter 13 to explain why the return on your Treasury bond futures position was low or high.
11. Measuring and explaining option price movements (from Chapter 14)
a. Assume that you purchased a call option (representing 100 shares) on the specific stock that you identified in Part I (f) of this project. What was your return from purchasing this option? [Your return can be measured as (Premt – Premt–1)/Premt–1, where Premt–1 represents the premium paid at the beginning of the school term and Premt represents the premium at which the same option can be sold at the end of the school term.] If the premium for this option is not quoted at the end of the school term, measure the return as if you had exercised the call option at the end of the school term (assuming that it is feasible to exercise the option at that time). That is, the return is based on purchasing the stock at the option’s strike price and then selling the stock at its market price at the end of the school term.
b. Annualize the return on your option by multiplying the return you derived in the previous question by (12/m), where m represents the number of months in your school term.
c. Compare the return on your call option to the return that you would have earned if you had simply invested in the stock itself. Notice how the magnitude of the return on the call option is much larger than the magnitude of the return on the stock itself. That is, the gains are larger and the losses are larger when investing in call options on a stock instead of the stock itself.
d. Assume that you purchased a put option (representing 100 shares) on the specific stock that you identified in Part I (g) of this project. What was your return from purchasing this option? [Your return can be measured as (Premt – Premt–1)/Premt–1, where Premt–1 represents the premium paid at the beginning of the school term and Premt represents the premium at which the same option can be sold at the end of the school term.] If the premium for this option is not quoted at the end of the school term, measure the return as if you had exercised the put option at the end of the school term (assuming that it is feasible to exercise the option at that time). That is, the return is based on purchasing the stock at its market price and then selling the stock at the option’s strike price at the end of the school term.