Financial Analysis

Assignment Requirements


Use footnotes not endnotes and a complete webliography

-Please complete the excel data, its very straightforward. Just input the data

-Please use sources from authorized websites.

-Please use footnotes not endnotes and a complete webliography

-I will tell you a specific corporate company name for corporate band analysis part in a couple of hours.




  • Financial Market Analysis: Each approx. 3/4 – 1 ½ pages in length

a)      Treasury Yield Curve

  1. Has the yield curve changed or remained the same over the time period? Explain the current shape relative to past years. What does this imply about the future direction of the economy? Use your economic analysis as back up for these changes. Graph the curve at year end 2010, 2011, 2012 and 11/11/13 (same chart)

b)     Corporate Bond Credit Worthiness

  1. Fill in the performance tab on your excel spreadsheet, completing bond sections.
  2. Has high yield or investment grade outperformed and why? Evaluate over time and give reasoning again based on economic analysis.
  3. Analyze the corporate default rate over the same time period, including default by investment versus non-investment grade, upgrades versus downgrades, bond issuance. Evaluate using economic analysis

c)      Stock Market

  1. Fill in the performance tab on your excel spreadsheet, completing stock section.
  2. Which market cap has outperformed? Explain why. What industries have outperformed over this time period?


  • Forecast the economy & any resulting change in interest rates & the stock market over the next year (approx. 6-12 months). You must discuss the direction of long term rates as well as short term rates. If you think monetary policy will shift in the next 6-12 months that should be part of your forecast as well. Include supporting information such as economic indicators or info from your yield curve and/or credit worthiness analysis (approx. 1 – 1 1/2 page)


Implementation: Fill in the portfolio distribution table for all securities invested. No more than 1/3 of your portfolio can be basic indexed funds/ ETF’s. For example, a general large cap ETF/ fund counts as part of that 1/3, but an ETF indexed to financials does not. No more than 5% can invested in any one individual asset but up 15% can be invested in a fund. You should choose at least one corporate bond (IG or HY) for an in depth analysis. This individual bond must have a maturity three years or longer for excel work.


Fixed Income Portion includes all bonds: Invest all your fixed income assets you identified in part one.


a)      Portfolio Analysis (1/2 page and should correlate to your economic/market forecast)

  1. Describe your overall portfolio characteristics and compare to the Barclays Aggregate.

i.      Characteristics of Index: modified duration = 5.39, convexity =             18, average yield to maturity = 2.39%, average credit quality = AA, 35% UST, 31% MBS, 20% corporates

  1. Explain your choice of portfolio duration, convexity and credit quality versus the index in relation to your forecast of interest rates, economy, etc.


b)      Corporate Bond Analysis (approximately 2-3 pgs)

  1. Give a very brief company summary in terms of industry, product, etc. State in your own words what the company does, industry etc.
  2. Using your quantitative results and company research, analyze the credit quality of the company, focusing in on the company’s ability to repay principal and interest.
  3. You MUST answer the following questions and not just review the ratios.

i.      How profitable from an operating standpoint is your company?

ii.      Does your firm have exposure to Europe/ China? Is it significant? Worrisome?

iii.      Is your firm expanding or shrinking and have these activities affected your company’s cash flow/ profits? Why is it expanding? Shrinking?

iv.      Look at the capital structure and liquidity over the past several years (2008- 2013). Is your firm more or less financially leveraged? If so, what is it using the money for? If not, where did it get the cash flow to pay it down over time?

  1. Has its credit rating changed over the past several years? If so, explain the change


Completing your portfolio: For funds, copy and paste performance, risk and expense data directly into excel worksheet and write abrief write-up of the fund or company. For individual bonds state the company’s credit rating and why this specific bond fits into your portfolio (a paragraph is sufficient – do not copy the profile of the company. Rather explain how this company fits into your client’s portfolio using a couple of ratios to back up your selection). For all funds, explain why you chose passive or active management and why this particular fund and/or ETF.


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