The Treasury Yield Curve

Project instructions:
Interest rates do fluctuate, and predicting interest rate changes is an important, yet challenging aspect of a financial manager’s job.

Explain the Treasury yield curve by using the “Illustrative Treasury Yield Curves” (Figure 6-5) in your text, Fundamentals of Financial Management. Refer to the Table

6.5a

Using one of the items below, construct your own yield curve (similar to Figure 6-5). The maturities must be 1, 5, 10, 20, and 30 years as used in Figure 6-5; however,

the rates will vary depending on which item you select. No more than three students may select the same item or prepare a yield curve on a similar company. The data

you need to construct your yield curve can be found on the following Web sites:

http://finance.yahoo.com/bonds

http://finance.yahoo.com/bonds/composite_bond_rates

http://www.thornburginvestments.com/research/articles/laddering_aicpa_apr2008.asp

http://reports.finance.yahoo.com/z1?b=1&so=a&sf=m&tc=1&stt=-&pr=0&cpl=-1&cpu=-1&yl=-1&yu=-1&ytl=-1&ytu=-1&mtl=-1&mtu=-1&rl=-1&ru=-1&cll=-1

Projected inflation rates can be found on the Internet. Make sure your source is reliable. Here is one recommended source for short-term projections:

http://finance.yahoo.com/bonds/composite_bond_rates

Additional helpful sources for calculating the rate of inflation or CPI are:

http://cost.jsc.nasa.gov/inflation/nasa/inflateNASA.html

http://www.bls.gov/cpi/

Helpful information on yield curves can be found on the following Web sites:

http://japan.pimco.com/EN/Education/Pages/YieldCurveBasics.aspx

http://www.tvmcalcs.com/blog/comments/chart_the_yield_curve_using_yahoo_finance_data/

Your yield curve can be constructed based on any one of the following:

The US Treasuries
Composite Bond Rates

Corporate Bonds from:

General Motors
Alcola, Inc
Bell Telephone
Wal Mart
May Department Stores
Nabisco
Safeco
Bank of America
Dillards
Ford Motor
Federal Home Loan Mortgage Corp

Build your yield curve using Microsoft PowerPoint and post a single slide as an attachment to this. In your posting, explain what you learned about predicting interest

rates using yield curves. How did your institution or company differ from expectations prior to seeing the yield curve? What does this information mean to you?

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