Question

As the junior analyst for an investment management firm, you have been assigned to prepare a presentation for clients regarding the term structure of interest rates. Because the shape of the term structure of interest rates is often used to predict future macroeconomic conditions as wells as the course of future short-term interest rates, your presentation will consist of the

following:

-Plot the yield curve for each year between 2006 – 2020 and display these data on one graph.

-For each year indicate the shape of the yield curve, i.e., Normal, Inverted, or Flat.

-Calculate and plot the series of one-year forward rates for each year between 2006 –2020, i.e., 2f1, 3f1, 4f1, 5f1, 6f1, 7f1, 8f1, 9f1, 10f1 – the presentation must include your forward rate estimates.

-For each forward-rate curve indicate the expected direction of future short-term rates, i.e., Increasing, Decreasing, Constant.

To complete this assignment, one of your colleagues has provided you with the attached spreadsheet that contains year-end, constant-maturity and zero-coupon yields from 2006 –2020. These data are published by the board go governors of the federal reserve system and represents “constant maturity” and zero coupon yields that are interpolated by the U.S.Treasury from the daily yield curve for non-inflation-indexed Treasury securities. These yields are based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites of quotations obtained by the Federal Reserve Bank of New York.

Yield Curve

DATE	1-mo	3-mo	1-yr	2-yr	5-yr	7-yr	10-yr	20-yr	30-yr
2006	4.94	5.11	5.06	4.88	4.75	4.75	4.76	4.95	4.85
2007	2.74	2.82	2.71	2.48	2.98	3.31	3.74	4.35	4.33
2008	0.05	0.13	0.44	0.81	1.60	1.98	2.52	3.46	3.13
2009	0.02	0.06	0.35	0.93	2.48	3.21	3.73	4.50	4.60
2010	0.14	0.15	0.27	0.61	1.99	2.72	3.39	4.28	4.52
2011	0.02	0.03	0.12	0.24	0.84	1.38	1.97	2.70	3.03
2012	0.05	0.07	0.15	0.27	0.81	1.30	1.91	2.68	3.08
2013	0.02	0.04	0.12	0.39	1.65	2.29	2.86	3.52	3.77
2014	0.02	0.03	0.20	0.55	1.37	1.67	1.88	2.20	2.46
2015	0.23	0.26	0.54	0.90	1.52	1.85	2.09	2.49	2.86
2016	0.50	0.52	0.83	1.21	1.92	2.23	2.43	2.75	3.02
2017	1.30	1.43	1.80	2.03	2.38	2.51	2.58	2.73	2.88
2018	2.40	2.42	2.58	2.54	2.54	2.61	2.71	2.89	3.04
2019	1.53	1.55	1.53	1.52	1.56	1.67	1.76	2.07	2.22
2020	0.08	0.09	0.10	0.14	0.39	0.66	0.93	1.47	1.67

Zero Coupon

DATE	1-yr	2-yr	3-yr	4-yr	5-yr	6-yr	7-yr	8-yr	9-yr	10-yr
2006	4.9231	4.7957	4.6903	4.6210	4.5874	4.5840	4.6042	4.6421	4.6928	4.7526
2007	3.1683	3.1343	3.2193	3.3557	3.5111	3.6703	3.8266	3.9770	4.1206	4.2573
2008	0.3115	0.6146	0.9580	1.2935	1.6039	1.8857	2.1404	2.3715	2.5823	2.7760
2009	0.4964	1.1043	1.6944	2.2224	2.6805	3.0746	3.4143	3.7095	3.9685	4.1983
2010	0.2483	0.6349	1.1180	1.5969	2.0350	2.4235	2.7648	3.0651	3.3308	3.5679
2011	0.0759	0.2384	0.4656	0.7094	0.9492	1.1772	1.3915	1.5922	1.7805	1.9576
2012	0.1162	0.2424	0.4248	0.6261	0.8295	1.0277	1.2180	1.3998	1.5731	1.7384
2013	0.1253	0.4498	0.8854	1.3285	1.7399	2.1087	2.4355	2.7251	2.9831	3.2147
2014	0.3842	0.7874	1.0887	1.3327	1.5432	1.7328	1.9082	2.0732	2.2300	2.3797
2015	0.7370	1.1430	1.4043	1.5966	1.7566	1.9014	2.0390	2.1725	2.3033	2.4315
2016	0.8896	1.2607	1.5225	1.7286	1.9058	2.0671	2.2190	2.3644	2.5046	2.6404
2017	1.7297	1.9391	2.0300	2.0823	2.1300	2.1857	2.2524	2.3294	2.4146	2.5058
2018	2.5447	2.5638	2.5317	2.5016	2.4917	2.5057	2.5412	2.5940	2.6600	2.7356
2019	1.6348	1.6539	1.6406	1.6353	1.6508	1.6885	1.7454	1.8174	1.9007	1.9918
2020	0.1074	0.1400	0.1936	0.2690	0.3628	0.4706	0.5883	0.7126	0.8406	0.9704

PLEASE HELP ME AND THANKS IN ADVANCE!