Plot the current yield curve from the interest rates of U.S. Treasury securities
ID: 2715142 • Letter: P
Question
Plot the current yield curve from the interest rates of U.S. Treasury securities as found in WSJ or IBD, or examine the chart WSJ or IBD provides. Do not show the curve, but do describe and define it (Normal or Inverted).
Instructions: Describe the trend of interest rates over the last several years.
Give me your best educated estimate of where interests are headed over the next year and justify your answer.
Determine the approximate percentage appreciation or depreciation of the NASDAQ Composite, Dow Jones Industrial Average, and the S&P 500 for the last 12 months and provide these figures.
Explanation / Answer
Answer: While looking at the interest rates of U.S. Treasury securities of different tenor in WSJ and drawing the current yield curves, I observe that all the graphs pertained to long term are upward sloping yield curves, when all the graphs pertained to short term yield curve are download sloping. This gives lots of message regarding the cost of money in the economy. I may make a note that, at present the treasury securities which are short term in nature has lower yield than that of long term securities, which has higher current yield. This will allure the investor to invest more in the long term securities, which will lead to the economy development. It also may be pointed out that, every long term investor are more benefited that short term investors in case of investment in Treasury Securities. The US dollar yield curve as of February 9, 2005, the curve has a typical upward sloping shape. So I would say it is normal.
Answer:After reviewing the Federal Reserve statistical release of selected interest rates provides the numerous rate fluctuations. It seems that over the last 3 years rates have fallen. Rates began to fall in 2008 but did have much larger drops in 2009 which has continued to be the trend to date.
Answer: After reviewing and analyzing the current trends and considering the past three years I believe that interest rates will remain down until at least the second quarter 2012. Personally, I believe they will remain this way longer because I am sure some other massive future event will occur before any real change has manifested. The good thing is that currently individuals as well as businesses are borrowing money at the current rates and increasing the rate would dramatically slow the economy.
Because so many loan products are based upon the Prime Interest Rate, describe it and provide the current Prime Interest Rate.
The Prime Rate is defined by The Wall Street Journal as "The base rate on corporate loans posted by at least 75% of the nation's 30 largest banks." Currently the Prime Rate is 3.25% and has been since 2008. In the late 1980’s the Prime Rate was as high as 11%. The prime rate is used by banks and other financial institutions for loan purposes. The term originally indicated the rate of interest banks would lend to their most worthy customers. This is no longer the case. Interest rates are now more often expressed as a percentage above or below the prime rate.
Answer:NASDAQ:
The NASDAQ is an electronic exchange. Stocks are traded through an automated network. NASDAQ stands for: National Association of Securities Dealers Automated Quotations System. Generally speaking it is where most technology stocks are traded. An easy way to tell if a company is listed on the NASDAQ is to look at the ticker symbol. Symbols that are made up of four letters are listed on the NASDAQ such as: Microsoft = MSFT, Dell Computers = DELL, Cisco = CSCO.
From: May 11, 2010 – May 11, 2011
[(2845.06-2425.02)/ 2425.02] x 100 = + 17.32% (appreciation)
Current Year to Date - December 31, 2010 - May 11, 2011
[(2845.06-2652.87)/ 2652.87] x 100 = +7.24% (appreciation)
DOW JONES INDUSTRIAL AVERAGE:
The Dow Jones Industrial Average Index is one of the oldest published indexes world-wide. This past Wednesday the Dow Jones celebrated its 115th anniversary. It is an index of 30 large companies that represent approximately 20% of the complete market value.
May 11, 2010 – May 11, 2011
[(12,630.03-10,986.91)/ 10,986.91] x 100 = +15.90% (appreciation)
Current Year to Date - December 31, 2010 - May 11, 2011
[(12,630.03-11,577.51)/ 11,577.51] x 100 = +9.09% (appreciation)
The S&P 500 is regarded as the best single gauge of the large cap U.S. equities market. The index was first published in 1957. The S & P 500 has over $4.83 trillion benchmarked with index assets of approximately $1.1 trillion of the $4.83 trillion total. The index includes 500 leading companies in leading industries of the US economy and over 75% of US equities.
May 11, 2010 – May 11, 2011
[(1342.08-1171.67)/ 1171.67] x 100 = +14.54% (appreciation)
Current Year to Date - December 31, 2010 - May 11, 2011
[(1342.08-1257.64)/ 1257.64] x 100 = +6.71% (appreciation)