Prepare a financial report for Pepsico Inc firm

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Reference no: EM131951182 , Length: word count:3000

Assignment -

Objective: This assignment asks you to prepare a financial report for a real U.S. firm using data from Yahoo! Finance and the methods presented in the second part of the module. The report needs to be at professional standards and easy to read.

The firm's name is 'Pepsico Inc.'

Question: Suppose you work as a quantitative analyst in a big hedge fund and you have been asked to prepare a financial report. In order to prepare your report you need to collect data on monthly dividend-adjusted closing prices for the firm assigned to you and for the period from January 2000 to December 2017 (you can find your firm in the "Assigned Firms CW2.xls" file inside the Coursework 2 folder in the "Summative Assessment 17/18" section of the Bb).

In addition, you will have to use monthly data on the following variables: (i) the return on the S&P500 index, (ii) the CPI inflation rate, (iii) the default spread, and (iv) the VIX index (i.e. monthly volatility computed from option prices). You can find the above data in the "Economic_Data.xls" file on the Bb (same folder as above).

You should include the following items in your report:

Regression Analysis -

Your purpose is to build a simple model to explain the monthly returns of your firm's stock, using the above four economic variables. To this end, you need to estimate the relevant regression using the "Data Analysis Tool" of Microsoft Excel. Then perform the following tasks:

  • Discuss the interpretation of the slope parameters (i.e. betas).
  • Discuss the statistical significance of the slope parameters at the 5% and 10% significance levels, respectively, using the p-value, t-statistic, and confidence intervals.
  • Plot a histogram of the residuals. What do you conclude regarding the distribution of the residuals?
  • Describe how you would test the restriction that the slope parameter of the VIX index is equal to the slope parameter of the default spread using the appropriate test (Hint: No estimation required just a description of the approach and test).
  • In the context of the initial multiple regression test whether the returns on your firm's stock are on average higher in January. Is there any evidence in the literature about this relationship? Be brief in your answer.

Forecasting -

Suppose you want to build a model to predict the monthly returns of your firm. To do this, you need to perform the following tasks:

  • Apply an exponential smoothing to the series of monthly returns of your firm's stock with a smoothing constant of 0.8. Change the smoothing constant to 0.3. Plot the two smoothed series on the same graph. Why are they different?
  • Estimate a regression to examine if the returns of the S&P 500 of the previous six months can predict the current month returns of your firm's stock. Comment on the overall predictive ability of the model.
  • Calculate the mean squared error of the above three methods and discuss which one has the best predictive performance and why.
  • "Good models always produce better forecasts". Briefly discuss this statement.

Derivatives -

Your company enters into a short position in a futures contract to sell 5,000 bushels of corn for 250 cents (i.e. $2.5) per bushel. The initial margin is $3,000 and the maintenance margin is $2,000.

a) What price change can lead to a margin call?

b) Under what circumstances would $1,200 be withdrawn from the margin account?

Explain how the margin account protects an investor from the possibility of default.

Word limit: The report should not exceed 3,000 words. This limit excludes the Appendix, but includes the references.

Attachment:- Assignment Files.rar

Reference no: EM131951182

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Reviews

len1951182

4/20/2018 7:45:59 AM

TOTAL WORDS: 3000WORDS. HARVARD STYLE! the firm‘s name is ‘Pepsico Inc.' I give you an example of the report with another company. If U don't know how to do the excel, you can see the example and the lab. The specific requirement is in the ASSIGNMENT 2. You can see the 'objective ',please use the 'methods presented in the second part of the module'. thank you so much.

len1951182

4/20/2018 7:45:50 AM

Please attach a separate copy of your Excel workfile with your submission OR include a copy of your Excel workbook as an appendix to your report. 25% of the coursework mark will be subtracted from submitted assignments that do not include the Excel workbook.

len1951182

4/20/2018 7:45:44 AM

Important details: The "Assigned Firms CW2.xlsx" file provided in the Coursework 2 folder on the Blackboard site of the module assigns a real U.S. firm to each student. Therefore, you should prepare the report for the firm assigned to you. To find the data you need, you should use Yahoo! Finance. A link to each firm's webpage is provided in the above file. The questions are related to the material covered in Lectures 11-17 and Labs 5-7 of the module. You should prepare your report in Microsoft Word or in another word processing software.

len1951182

4/20/2018 7:45:39 AM

In each section of the report, you should also include details about the data you used and the formulas you applied for your computations. However, try to be brief and clear in your answers. The questions should be answered using Microsoft Excel in a single workbook with multiple worksheets. In the workbook, you should include all the data you obtained from Yahoo! Finance. Your submission should include a copy of your Excel workbook as an appendix to your report OR as a separate attachment. 25% of the coursework mark will be subtracted from submitted assignments that do not include a copy of the Excel workbook.

len1951182

4/20/2018 7:45:34 AM

You should present your formulas and models in Word and Excel in a clear manner. You should also use an appropriate format for the Excel cells. All graphs should be included in your report (Word file). Any questions related to the coursework should be submitted to the "Assignment 2 Questions" forum within the Q&A forum on the Blackboard page of the module. The link to the Q&A forum can be found under the Module Documents section. To ask a question, click on Create a New thread and post your question. You should also click on "Subscribe" to receive an email when a new question is posted. It is a good practice to visit this forum regularly.

len1951182

4/20/2018 7:45:29 AM

Submission deadline: Thursday at 15:00 (3 PM). Word limit: The report should not exceed 3,000 words. This limit excludes the Appendix, but includes the references. In preparing your coursework, you should be aware that you will be assessed by reference to the extent to which your answers meet the following criteria: Identification and application of knowledge to the question asked. Evidence of reading and research. Capacity to find data from online resources. Ability to construct financial models related to the question asked. Ability to correctly implement these models using spreadsheet software. Demonstration of ability to structure and present work in a clear and coherent way. Clear and accurate expression. Please preserve anonymity by using your university number, not your name. This coursework counts for 50% of the assessment in this module.

len1951182

4/20/2018 7:45:23 AM

Referencing - Your coursework should clearly distinguish between your original words and ideas, and those of others. When referring to the work of others, from books, journals or any other source (including the internet), it is essential that you make this clear by acknowledging your source and referencing correctly. Failure to reference correctly will lose you marks and may constitute plagiarism or collusion. Unless specified otherwise by the module organiser, Norwich Business School uses the Harvard system of referencing. Penalties for late submission - The deadline for submission of coursework is 15:00 (3pm) on the submission/due day. This is for both electronic submission and paper copy submissions.

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