GRAPHING YIELD CURVES

[referred to in the text in Problem 7.7]

The following are fictious data on yields to maturity. We will construct the yield curve for May 2005.

Month

2005:01
2005:02
2005:03
2005:04
2005:05
2005:06
2005:07
2005:08
2005:09
2005:10
2005:11
2005:12
2006:01
2006:02
2006:03
2006:04

1-year
2-year
3-year
3-month
Constant Constant Constant
Constant
Maturity Maturity Maturity
Maturity
Treasury Treasury Treasury
Treasury
Bond
Bond
Bondl
Bill Rate
Rate
Rate
Rate
(percent)
(percent) (percent) (percent)
1.2
1.2
1.3
1.6
1.5
1.4
1.6
1.9
2.1
2.2
2.2
2.5
2.4
2.3
2.3
2.6

1.4
1.6
1.6
1.8
1.9
1.9
2.0
2.4
2.4
2.4
2.5
2.7
2.6
2.5
2.6
2.9

1.7
1.8
1.9
2.1
2.1
2.2
2.3
2.5
2.5
2.5
2.6
2.8
2.7
2.6
2.8
3.1

2.0
2.1
2.3
2.4
2.4
2.4
2.5
2.7
2.7
2.6
2.7
2.9
2.8
2.7
2.9
3.2

5-year
Constant
Maturity
Treasury
Bond
Rate
(percent)

7-year
Constant
Maturity
Treasury
Bond
Rate
(percent)

10-year
Constant
Maturity
Treasury
Bond
Rate
(percent)

2.3
2.4
2.5
2.6
2.6
2.6
2.7
2.9
2.9
2.8
2.8
2.9
2.8
2.7
2.9
3.2

2.5
2.5
2.6
2.7
2.7
2.7
2.8
2.9
2.9
2.8
2.9
2.9
2.9
2.8
2.9
3.2

2.6
2.7
2.7
2.8
2.8
2.8
2.9
3.0
3.0
2.9
2.9
3.0
2.9
2.8
3.0
3.2

The x-axis of the chart should reflect the time to maturity as indicated in the headings to the columns:
time to maturity
yield to maturity

0.25
1.5

1
1.9

2
2.1

3
2.4

5
2.6

7
2.7

A Yield Curve
3.0
2.8
2.6

10
2.8

0 0 1 2 3 4 5 6 Time to Maturity 7 8 9 . chart has its axes reversed.8 2.6 2.4 2.6 1.4 1. Be careful. click on the chart and then on the menu CHART.0 1.0 2. SOURCE DATA.8 2.6 1.6 2. Yield to Maturity A Yield Curve 3.Yield to Maturity A Yield Curve 3.2 2.0 2. SOURCE DA at the data ranges for each axis on the SERIES tab.2 2.0 1.0 0 1 2 3 4 5 6 Time to Maturity 7 8 9 The same chart can be produced as below without cutting and pasting by highlighting the data directly as To see the difference for each chart click on the chart and then click on the menu CHART.4 1.2 1.8 1.8 1.2 1. SE then change the row numbers (and possibly column numbers) to make sure that correct data are a each axis.4 2. Note: the Excel default is to treat the uppermost data series as the X-axis for a scatterplot.

0 0 1 2 3 4 5 6 Time to Maturity 7 8 9 .1.2 1.4 1.

The easiest way to produce a properly formatted chart is to cut and paste the correct values for each time to maturity below the times to maturity data. SCATTER. Columns B-H Then highlight the data (B35:H36) and INSERT. option (in this case) SMOOTH .Note: the time units are years. CHART. so that 3-months is 0. Here the data are copied from Row 20.25 years.

7 8 9 10 lighting the data directly as in Row 20. enu CHART. sure that correct data are assigned to 7 8 9 10 . SOURCE DATA and look a scatterplot. If your ART. Be careful. SOURCE DATA. SERIES tab.

7 8 9 10 .

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