Using Simple Regression Model to Explain the Relationship Between 3-Month T-Bill Rate and Dow-Jones Index

Page 3: Introduction to the Financial System Page 7: Commercial Banks Page 12: The Share Market and the Corporation Page 15: Corporations Issuing Equity into the Share Market Page 19: Investors in the Share Market Page 24: Short-term Debt Page 28: Medium- to Long-term Debt Page 32: Interest Rate Determination and Forecasting Page 37: The Foreign Exchange Market Page 40: Factors that Influence the Exchange Rate Page 42: Futures Contracts and Forward Rate Agreements Page 47: Options

26. A financial manager has detrermined that the appropriate rate discount for a foreign project is 17 percent. However, that discount rate applies in the United States using dollars. What discount rate should be used in the foreign country using the foreign currency? The inflation rate in the United States and in the foreign country is expected to be 3 percent and 8 percent, respectively.

(b) Coupon and principal of the Regular Treasury bonds are fixed, therefore if the inflation rate increases in the forecasting future, investor will receive the same amount of coupon and principal with less real value and purchasing power.

A multiple regression was ran with WEEKLY SAVINGS as the DEPENDENT VARIABLE and the rest as the INDEPENDENT VARIABLES.

In this paper, we will be using the log-log model. The log-log model used for the demand for wealth (attuned for inflation). We will be using the M1, as a display, for demand on wealth and interest rate as the illuminating variable affecting the demand for wealth. Using the regression, we will study the hypothesis. For this paper, the hypothesis used will talk about the connection between money and the interest rate. The null hypothesis, in this case, will be the interest affecting the demand for money in the economy. The data that we will be reviewing is from October 2008 to October 2011, 3 years worth of data. This connection will give us the basic understanding of the performance of the monetary policy in US economy after the crisis.

Why is T-bill’s return independent of the state of the economy? Do T-bill’s promise a completely risk-free return? Explain

I supplement these data with macroeconomic time series with information on equity and credit market conditions, pulled from Federal Reserve Economic Data (FRED). Specifically, I use the Wilshire 5000 Total Market Index and CBOE Volatility Index (VIX) to capture equity market conditions, the TED Spread and Moody’s Seasoned Baa Corporate Bond Minus Federal Funds Rate Spread to capture credit market conditions, and the Consumer Price Index for All Urban Consumers to control for inflation.

There are three general types of indicators: Leading, Coincident, and Lagging. Leading indicators signal future events. Things such as stock market return are a leading indicator. The stock market usually decline before the entire economy declines and vice versa. The coincident indicator changes at the same time of the economy. Personal income is an example of a coincident indicator. High personal income will coincide with a strong economy. The lagging indicator is used to confirm that a pattern is occurring or about to occur throughout the economy. Unemployment is a lagging indicator. When the unemployment rate is rising, the economy is doing poorly. While the Bank of Canada is unable to control the money supply directly because of the changing demand by private banks, the Bank of Canada can indirectly influence the money supply by altering interest rates or the level of banking reserves. By using current economic indicators and a prediction of Canada’s economic future, I will develop an appropriate monetary policy proposal to help expand Canada’s economy.

Imagine that you wake up and turn on the television as you are getting ready for work at 0600. You decide to watch the news, specifically the business channel. As you watch the news you learn that the Dow futures is down 300 points and that the Asian and European markets have done poorly. As you continue to listen to the news you learn that there is another healthcare facility that is laying off 3,000 people nationwide. Are you shocked by this information? Most likely you are not. This is how many people in the United States start each morning. There continues to be fluctuations in the economy, even though the numbers show that there is slight improvements. The purpose of this paper is examine unemployment, the interest rate and inflation,

A Study on S&P 500 Index Stock Return and Volatility using ARIMA and GARCH Modeling

The dependent variables are 5-year Treasury bill, 10-year Treasury bill, 15-year fixed mortgage rate average in the United States, and 30-Year Fixed Rate Mortgage Average in the United States. The data helps to explain how the different rounds of quantitative easing affected mortgage rates and how it will affect the long term treasury yields. Fixed mortgage rates were chosen since long-term rate are the most common and the most highly targeted by the fed. The treasury bills were chosen in order to compare to the mortgage rate since it is known that a large portion of QE was targeting the long term mortgage rates as opposed to short term treasury bills, so we wanted to display the difference between the two.

At a basic level, raising interest rates go hand in hand with appreciating currencies. And in many parts of the world, the US dollar is used as a benchmark of current and future economic growth. In developed countries, a strong dollar is seen in a positive light. But circumstances are different in emerging economies.

1. As per the IBIS report, the rate of interest are rising in very short period but expected to level out at

Using time series regression on the monthly returns we have estimated the beta coefficient for each stock. Using the market model of CAPM i.e., regressing each stock’s monthly returns against the market index (Nifty100) we have estimated individual stock beta’s.

To enhance the data, I gathered for my research and bring it all together, I conducted three semi-structured interviews to help me uncover a better understanding of what the impact on a fluctuation in interest rates from the Federal Reserve has on the economy and market in the U.S and other countries. During this time, I had three participants who donated their time to tell me a little more about themselves and what they knew about my topic. Participant 1, was a sixty-one-year-old male whom is a finance professional, as is he also a finance professor at Pace University. The knowledge he provided to me was very educational and helped me understand a little more about the missing information I needed to obtain from my literature