Question

In: Finance

Compute the daily interest (yield) changes, ∆y = y(t) − y(t − 1), for the 10...

Compute the daily interest (yield) changes, ∆y = y(t) − y(t − 1), for the 10 year constant yields over time. Also, please show the calculations you use for the first 5 answers

Date 10 year Treasury Constant Maturity Rate △Y
2015-01-02 2.12
2015-01-05 2.04
2015-01-06 1.97
2015-01-07 1.96
2015-01-08 2.03
2015-01-09 1.98
2015-01-12 1.92
2015-01-13 1.91
2015-01-14 1.86
2015-01-15 1.77
2015-01-16 1.83
2015-01-19 #N/A
2015-01-20 1.82
2015-01-21 1.87
2015-01-22 1.90
2015-01-23 1.81
2015-01-26 1.83
2015-01-27 1.83
2015-01-28 1.73
2015-01-29 1.77
2015-01-30 1.68
2015-02-02 1.68

Solutions

Expert Solution

Daily interest rate change for a day = △Y = Y(t) - Y(t-1)

where Y(t) = 10 year treasury constant maturity rate for the day and Y(t-1) = 10 year treasury constant maturity rate for previous trading day

Daily interest rate change for 05-01-2015 = 10 year treasury constant maturity rate for 05-01-2015 - 10 year treasury constant maturity rate for 02-01-2015 = 2.04 - 2.12 = -0.08

Daily interest rate change for 06-01-2015 = 10 year treasury constant maturity rate for 06-01-2015 - 10 year treasury constant maturity rate for 05-01-2015 = 1.97 - 2.04 = -0.07

Daily interest rate change for 07-01-2015 = 10 year treasury constant maturity rate for 07-01-2015 - 10 year treasury constant maturity rate for 06-01-2015 = 1.96 - 1.97 = -0.01

Daily interest rate change for 08-01-2015 = 10 year treasury constant maturity rate for 08-01-2015 - 10 year treasury constant maturity rate for 07-01-2015 = 2.03 - 1.96 = 0.07

Daily interest rate change for 09-01-2015 = 10 year treasury constant maturity rate for 09-01-2015 - 10 year treasury constant maturity rate for 08-01-2015 = 1.98 - 2.03 = -0.05

Similarly values can be calculated for other days, As there no value available of yield for 19-01-2015, hence we will not calculate daily interest change for 19-01-2015 and 20-01-2015.

We get the following table

Date 10 year Treasury Constant Maturity Rate △Y
02-01-2015 2.12
05-01-2015 2.04 -0.08
06-01-2015 1.97 -0.07
07-01-2015 1.96 -0.01
08-01-2015 2.03 0.07
09-01-2015 1.98 -0.05
12-01-2015 1.92 -0.06
13-01-2015 1.91 -0.01
14-01-2015 1.86 -0.05
15-01-2015 1.77 -0.09
16-01-2015 1.83 0.06
19-01-2015 #N/A #N/A
20-01-2015 1.82 #N/A
21-01-2015 1.87 0.05
22-01-2015 1.9 0.03
23-01-2015 1.81 -0.09
26-01-2015 1.83 0.02
27-01-2015 1.83 0.00
28-01-2015 1.73 -0.10
29-01-2015 1.77 0.04
30-01-2015 1.68 -0.09
02-02-2015 1.68 0.00

jeff jeffy answered 2 years ago
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