i attached the sample i had and the one you did with my edits. please review

I. Macroeconomic and Industry Analysis 1. What is the difference between real GDP and nominal GDP? The difference between the real GDP and the nominal GDP is that the real GDP is adjusted for inflation, whereas nominal GDP is not. 2. What is the annual growth rate of the real economy (GDP growth rate) over the most recent 1-year (2014), 5-year (2010-2014), and 10-year period (2005 to 2014)? (Not seasonally adjusted, chained in 2009 dollars)1 OneYear : 2.4 Five Years : Average( of all years) Ten Years : 20142005 2.4 3.3 = =0.27 2005 3.3 3. What is the inflation rate over the most recent 1-year (2014), 5-year (2010-2014), and 10-year period (2005-2014)?2 OneYear :1.6 Five Years : average Ten Years : 20142005 1.62 3.39 = =0.52 2005 3.39 4. What years are recession years during past 10 years? (Annual GDP, Not seasonally adjusted, chained in 2009 dollars) Mber business cycle (gives you date of when recession starts and when ends) 1 https://research.stlouisfed.org/fred2/series/A191RL1A225NBEA 2 https://research.stlouisfed.org/fred2/series/FPCPITOTLZGUSA The recession started in Q4 of 2007, continued throughout 2008 and ended before Q3 of 2009. 5. Calculate the correlation between stock return (S&P 500 index)3 with GDP growth (quarterly, seasonally adjusted)4, unemployment rate (quarterly, seasonally adjusted)5, consumer confidence index6 over the most recent 10-year period. Quarterly Dec31 = 0, March 31 0123 p0 p1 Ln(p1/po) = Q1 6. What are the economists' forecast for unemployment, GDP growth, and inflation in 2016? Use a forecast horizon of one year ahead. Google gdp forecast 7. How do these variables relate to stock market and bond market? (Hint: you may calculate the correlation between the macro variables and SP 500 index return (10-year Treasury bond return) using annual frequency data for 10 years). 8. What is the volatility (standard deviation) of S&P 500 index return over the most recent 1-year (2014), 5-year (2010-2014), and 10-year period (2005-2014)? (Hint: using monthly frequency S&P 500 index return data to calculate the standard deviations). 9. Which industry is your firm engaged (provide the different business lines of your firm)? Industry info is on yahoo finance 3 https://research.stlouisfed.org/fred2/series/SP500 4 https://research.stlouisfed.org/fred2/series/A191RL1Q225SBEA 5 https://research.stlouisfed.org/fred2/series/Q0892BUSQ156SNBR 6 https://research.stlouisfed.org/fred2/series/UMCSENT 10. Summarize and compare the key statistics for the stock and the industry (choose at least you believe informative, such as P/E ratio, market cap, dividend yield, ROE, sales etc.) II. Valuation Analysis Valuate the stock using dividend discount model Step 1. Collect adjusted stock return (Ri) and the S&P 500 Composite Index return (Rm) from Yahoo Finance (use data more than five years), collect three-month T-bill rate (Rf=TB3MS) from Economic dataFRED @ http://research.stlouisfed.org/fred2/categories/116 (TB3MS is an annualized time series and you have to divided the series by 12 to generate monthly T-bill rate). Construct excess returns for stock (Ri - Rf) and market (Rm - Rf). Use monthly frequency data for 10 years (ending on December 31, 2015). Step 2. Run the regression of excess stock return on excess market return in Excel (click on Tools in the menu bar, choose Data Analysis and then double lick regression. If it does not show Data Analysis in the drop-down list, click Add-ins on the drop-down list. When the Add-Ins dialog box pops up, click the box in front of Analysis ToolPak, and then click the OK button. The Data Analysis add-in will be installed. Report your results: interpret the coefficients, t-statistics and R2. Step 3. Estimate discount rate using CAPM (Please provide details on your estimation. You need to estimate risk free rate and risk premium. A reasonable risk free rate should be between 2%-3% and reasonable risk premium should be between 5%-9%). Step 4. Estimate the discount rate using the constant dividend growth model (provide details on your estimation and you need to estimate the growth rate). Step 5. Valuate your stock using constant dividend growth model (provide details on your calculation). Step 6. Comparing your estimation with the current stock price, show whether the stock is undervalued or overvalued. Determine your trading strategy based on your estimation. Sources: Wall Street Journal Chapter 12, 20, 21 in Bodie, Kane, and Marcus for Part I Chapter 5, 6, 7, 13, 14, 18 in Bodie, Kane, and Marcus for Part II Chapter 14 in Bodie, Kane, and Marcus for Part III Yahoo Finance @ http://finance.yahoo.com/ Economic data-FRED @ http://research.stlouisfed.org/fred2/ Economic Report of the President @ http://www.gpoaccess.gov/eop/index.html Federal Reserve Bulletin @ http://www.federalreserve.gov/FOMC/BeigeBook/2007/ Survey of Current Business @ http://www.bea.gov/scb/index.htm Humphrey Hawkins Testimony and Report @ http://www.federalreserve.gov/boarddocs/hh/ Note: Use monthly data to estimate beta; use annual data to valuate stock. Late reports without preapproval from the instructor will receive no credit. I. Macroeconomic and Industry Analysis PART 1 1. What is the difference between real GDP and nominal GDP? GDP refers to the economic value of goods and services produced within a country's boundaries in a given financial year. Nominal GDP is usually estimated at current prices without the effect of inflation whereas real GDP is the estimation that is made at constant prices when the effect of GDP has been adjusted. 2. What is the annual nominal growth rate of the economy (GDP growth rate) over the most recent 1year (2015), 5year (20112015), and 10year period (2006 to 2015)? Annual nominal growth rate of the economy (GDP growth rate) Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 10-year= Growth rate (%) 5.8 4.5 1.7 2.0 3.8 3.7 4.1 3.3 4.2 3.7 20152006 3.75.8 = =.362 2006 5.8 20152011 2.63.7 = =.297 5-year= 2011 3.7 5-year = average= 3.8% Source: Bureau of Economic Analysis US Department of Commerce http://www.bea.govational/index.htm#gdp 3. What is the annual real growth rate of the economy (GDP growth rate) over the most recent 1year (2015), 5year (20112015), and 10year period (2006 to 2015)? Annual real growth rate of the economy (GDP growth rate) 10-year= 20152006 2.62.7 = =.037 2006 2.7 Year Growth rate (%) 20152011 2.61.6 = =.625 2006 2.7 5-year= 2011 1.6 2007 1.8 2008 0.3 5-year = average= 2.1% 2009 2.8 2010 2.5 1-year=2.6% 2011 1.6 Sources: 2012 2.2 2013 1.7 2014 2.4 2015 2.6 https://fred.stlouisfed.org/series/A191RL1A225NBEA 4. What is the inflation rate over the most recent 1year (2015), 5year (20112015), and 10year period (20062015)? Year 2006 Inflation 3.24 rate (%) 2007 2.85 2008 3.85 2009 0.34 2010 1.64 2011 3.16 2012 2.07 2013 1.47 2014 1.62 2015 0.12 20152006 .123.24 = =.963 10-year= 2006 3.24 5-year= 20152011 .123.16 = =.962 2011 3.16 5-year = average= 1.69% 1-year=.12% Source: InflationData.com http://inflationdata.com/Inflation/Inflation_Rate/CurrentInflation.asp 5. What years are recession years during past 10 years? 20082009 Greatly due to the subprime mortgage crisis. PART 2 6. What are the economists' forecast for unemployment, GDP growth, and inflation in 2016? Use a forecast horizon of one year ahead. Economists' forecast for unemployment, GDP growth, and inflation in 2016 Unemploymen t GDP growth rate Inflation 2016 4.8% 2017 4.6% 2018 4.5% 1.8% 2% 2% 1.3% 1.9% 2% Source: https://www.thebalance.com/useconomicoutlook3305669 7. How do these variables relate to stock market and bond market? (Hint: you may calculate the correlation between the macro variables and SP 500 index return using annual frequency data of 10 years). Growth rate Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Total S&P 500 Return (%)x 1.4 13.69 32.39 16.00 2.11 15.06 26.46 37.00 5.49 15.79 91.39 X2 1.96 187.4161 1049.112 256 4.4521 226.8036 700.1316 1369 30.1401 249.3241 4074.34 Nominal growth rate (y) 2.6 2.4 1.7 2.2 1.6 2.5 2.8 0.3 1.8 2.7 14.4 Y2 XY 6.76 5.76 2.89 4.84 2.56 6.25 7.84 0.09 3.24 7.29 47.52 3.64 32.856 55.063 35.2 3.376 37.65 74.088 11.1 9.882 42.633 157.31 2 n x2 x y r= n y 2 n ( xy ) ( x )( y) 1573.121316.016 r= [ 40743.44074.34 ] [475.247.52] r=1.6395 There is a positive relationship between the return on stock and bond securities and the GDP growth (both the real GDP growth and nominal GDP growth). This means that there is a direct relationship between growth in GDP and the stock and bonds market. When GDP increases, the price and returns of securities in the stock and bond market increase. Alternatively, the price and returns of securities in the bonds and stocks market increases when the GDP increases. Source : https://ycharts.com/indicators/sandp_500_total_return_annual Inflation Year Return (%)x X2 Inflation Y2 xy 2015 1.4 2014 2013 2012 2011 2010 2009 2008 2007 2006 Total 13.69 32.39 16.00 2.11 15.06 26.46 37.00 5.49 15.79 91.39 3.24 1.96 187.4161 1049.112 256 4.4521 226.8036 700.1316 1369 30.1401 249.3241 4074.34 2.85 3.85 0.34 1.64 3.16 2.07 1.47 1.62 1.3 20.86 10.497 6 8.1225 14.8225 0.1156 2.6896 9.9856 4.2849 2.1609 2.6244 1.69 56.9936 4.536 39.0165 124.7015 5.44 3.4604 47.5896 54.7722 54.39 8.8938 20.527 243.667 2436.671906.39 r= 36669.06512.9424 r=2.8195 There is a positive relationship between inflation and the return on stock and bond securities. This indicates that there is a direct relationship between the rate of inflation and the stock and securities market. When the rate of inflation increases, the price and return on the securities in the stock and bonds market also increase. Alternatively, the price and return stock and bonds market increase when GDP increases. Unemployment Past research has shown that there is a negative relationship between the rate of unemployment and the stock and bond market. Before the rate of unemployment decreases, the price and return on the bonds and stock market will be hig h