ompany project part 4 Bonds

This project is designed to familiarize students with the data available to investors on Wall Street and provide an opportunity to get some hands-on experience applying finance theory and models to real firms. First, make sure that you keep everything organized and backed up somewhere.

Each group should pick a publicly traded firm (on a first come, first-served basis, so no two groups have the same firm to analyze) with return data available for the last five years. Pick a company from the S&P 500 Index that meets these requirements. You can sign up here by entering the names of each group member in Columns H and I:

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ompany project part 4 Bonds
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Your group write-ups should be typed, using a font of 12, and should be clear, concise & comprehensive. Please do not include, without proper citations thereto, any sources used to gather the necessary information. Please refrain from citing facts that are available in your sources, rather focus on your analysis. I caution you to focus your project not on a preset number of pages, but rather on its content. Please limit your team’s write-up for each part of the group project to no more than two pages, single-spaced for parts 1, 2, and 4 and no more than three pages for part 3. You are free to include any additional tables, excel charts, or spreadsheets that you deem necessary. Please include a cover page clearly stating all member names, course title, company name and date.


1                     History (20%)

  1. Deadline: should be completed by January This is a group project but each member has to upload the same document on iLearn.
  2. Provide a brief history of the firm over the past ten years, including the industry the firm is in, its major competitors (at least 2), and any major acquisitions, restructurings, or other newsworthy events that have occurred recently.
  3. Sources: Company’s website, Moody’s, Value Line, The Wall Street Journal, company annual reports (


2                     Dividends (20%)

  1. Deadline: should be completed by February 10th. This is a group project but each member has to upload the same document on iLearn.
  2. Go to the company’s website and collect information in regards to payout
    1. Have they paid a dividend?
    2. What is the amount of the most recently paid dividend?
  • Have they repurchase stock? When? At what price?
  1. Any additional information about the company’s payout
  2. Sources: Company’s website, Moody’s, Value Line, The Wall Street Journal, and company annual reports(


3                     Risk Analysis (40%)

  1. Deadline: should be completed by February This is a group project but each member has to upload the same document on iLearn.
  2. Source: Wharton Research Data Services (WRDS):

For academic and non-commercial research purposes only! User name:        richey

Password:        UCRisNumber1

  1. Download the Fama-French factors in monthly frequency from This data includes four factors: 1) excess return on the market, 2) SMB, 3) HML and 4) Momentum.


  1. Download the returns for your firm in monthly frequency for the last five years from WRDS/CRSP.



  1. Calculate the arithmetic average and standard deviation of monthly excess returns for your firm and the market index over the past five


  1. Estimate the following time-series regression models following the textbook subsection “Estimating the Index Model” and “Fama-French Model.”






The dependent variable in all regressions is the excess return on your stock. In       f (1), you have only one independent variable – the excess return on the market. In f (2), you have three independent variables – excess return on the market, SMB, and HML, i.e., the Fama-French Three-Factor Model. In f (3), you have four independent variables – excess return on the market, SMB, HML and Momentum Factors, i.e., the Four-Factor Fama-French-Carhart Four-Factor Model. Make sure to include the regression results in your write- up as screenshots.


  1. For each regression specification, interpret the R-squared. Is the R-squared the highest for regression specification f (3)?



  1. In the models above as you expect, the alpha term is of particular It is the regression intercept; but more important, it is also the excess return the asset earned above and beyond what is predicted based on its risk. In other words, if the alpha is positive, the asset earned a return greater than it should have, given its level of risk; if the alpha is negative, the asset earned a return lower than it should have, given its level of risk. This measure is called “Jensen’s alpha.” For the regression specification, interpret the alpha estimate. Is it statistically significantly different from zero? Did the security earn a return greater than it should have? Do all models agree on whether the security earned a return greater than it should have?


  1. Compare your estimates of market beta in f (1) above to at least two other betas, e., those published by Reuters, Bloomberg (the terminal is located in Anderson South in the basement), ValueLine, Yahoo, your brokerage firm (Schwab, etc.) and/or Morningstar.


  1. Using your beta estimate in f (1) above, compute the expected return on your stock (assume 10 year bonds as the risk-free rate and that the risk-premium is 2.5%). Use the most recent data for 10-year bonds reported on


  1. The employers want to know your relevant skills. Do not forget to include on your resume: WRDS/CRSP/Fama-French Factors, Be specific about what you have done. For example:
    1. Familiar with retrieving data from Wharton Research Data Services (WRDS), in particular Center for Research of Security Prices (CRSP)
    2. Performed regression analysis in Excel, in particular Single Index Model and Three- and Four- Factors Fama-French-Carhart


4                     Bonds (20%)

  1. Deadline: should be completed by March 11th. This is a group project but each member has to upload the same document on iLe


  1. Main source of data for corporate bond is:



  1. Go to the above website and type in your company name and ticker If you find that your company issues bonds, pick one of them and collect the following information:
    1. Date of issue
    2. Amount of issue
  • Maturity date and currency denomination (most likely in U.S. dollars)





                      Extra Stuff



  1. Example on bond quotations: Suppose that today’s date is April 15. A bond with a 10% coupon paid semiannually every January 15 and July 15 is listed in The Wall Street Journal as selling at an ask price of 101.25. April 15 is midway through the semi-annual coupon period. Therefore, the invoice price will be higher than the stated ask price by an amount equal to one-half of the semiannual coupon. The ask price is 101.25 percent of par, so the invoice price is: $1,012.50 + (1/2 × $50) = $1,037.50


  1. FINRA has lots of information on its website In the United States, the Financial Industry Regulatory Authority, Inc. (FINRA) is a private corporation that acts as a self-regulatory organization (SRO). FINRA is the successor to the National Association of Securities Dealers, Inc. (NASD) and the member regulation, enforcement and arbitration operations of the New York Stock Exchange. It is a non-governmental organization that regulates member brokerage firms and exchange markets. The government agency that acts as the ultimate regulator of the securities industry, including FINRA, is the Securities and Exchange Commission.


  1. Face value
  2. Annual coupon
  3. Is the bond callable, puttable or convertible?
  • Yield, current price and ranking
  • Any additional information
  1. If your search procedure above shows that there are no bonds issued then you need to double check. Go to the company website and you find a link for “Investors” or “Investor Relations.”
  2. There should be a link “SEC filings” or
  3. The most recent filing will probably be 10-Q (Quarterly report). Download it and look at the balance sheet. See what is under “Total liabilities.” Any long-term debt?


Helpful formulas in Excel that you will need:


Estimating standard deviation:


Estimating variance:


Estimating arithmetic average:


How to install Excel Analysis ToolPak


To install the Analysis ToolPak please follow the instructions:


The Analysis ToolPak includes the tools described below. To access these tools, click Data Analysis in the Analysis group on the Data tab. If the Data Analysis command is not available, you need to load the Analysis ToolPak add-in program.


Load the Analysis ToolPak


  1. Click the File tab, click Options, and then click the Add-Ins
  2. In the Manage box, select Excel Add-ins and then click
  3. In the Add-Ins available box, select the Analysis ToolPak check box, and then click


TIP   If Analysis ToolPak is not listed in the Add-Ins available box, click Browse to locate it.

If you are prompted that the Analysis ToolPak is not currently installed on your computer, click Yes to install it.



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