Interest Rates Worksheet

Plot and discuss: plot the following 2 series on the same diagram: 10-year Treasury Constant Maturity Rate – daily or monthly frequency; this is the interest rate on the 10-years to maturity US Treasury bond, & the 3-month Treasury Bill Rate (secondary market; this is the interest rates on a 3 month to maturity treasury bill). The plot must be submitted with your assignment. [see notes below for more info]

2. Discuss the data in the plot: 100-150 words. Try to comment on the trend (if any) and discuss the behavior of the data over the business cycle (i.e. the fluctuations) over time. Discuss any interesting/unique behavior you observe. Make sure to discuss the data over time, not only the last few years and the impact of Covid-19.

NOTES:

There are many interest rates that one can find on FRED. Use the info below to find the correct interest rates. You want to graph “nominal interest rates”, so do not use “inflation indexed yields”.

Long term interest rate, specifically the interest rate on 10 years to maturity T-bonds can be found by searching for the following title: “Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity” (daily data is available from 1962 to

present)

Short term interest rate, specifically the interest rate on a 3-month to maturity T-bill can be found by searching for the following title: “3-Month Treasury Bill Secondary Market Rate” (daily data is available from 1954 to present)
maximum steady state consumption (c_max) [the answers to part a. are not the answer to this
question, you must use calculus to solve this problem]
3. [4 points] Data – plot and discuss. For this question you need to use FRED to obtain a
figure showing two different nominal interest rates – the figure must be included with your
assignment, and you want to discuss briefly what you observe in the figure as you have done in
previous assignments.
Remember that you want to provide a “descriptive analysis” of the data; you are not required to
explain what caused the changes in the data, you can simply discuss what you observe in recession
vs. expansions, the trend [if any] over time, anything that stands out as different or particular, etc.
Provide your response in essay type format; must be typed.
Source: Obtained the figure with the data from the Federal Reserve Bank of Saint Louise, the
FRED database; just copy the figure into word. You can edit the figures to add multiple
series/variables to the same diagram, etc. as done in previous assignments. Download the figure
and paste it into word. Here is the link: http://research.stlouisfed.org/fred2/
DURATION & FREQUENCY of data: Obtain the maximum data points possible (you should
have several decades of data); always make sure you plot a series that has not been discontinued.
Daily data is available, so you can use that or you can use monthly. Make sure to use the same
frequency for all time series.
H ere is what you need to do:
1. Plot and discuss: plot the following 2 series on the same diagram: 10-year Treasury
Constant Maturity Rate – daily or monthly frequency; this is the interest rate on the
10-years to maturity US Treasury bond, & the 3-month Treasury Bill Rate (secondary
market; this is the interest rates on a 3 month to maturity treasury bill). The plot must
be submitted with your assignment. [see notes below for more info]
2. Discuss the data in the plot: 100-150 words. Try to comment on the trend (if any) and
discuss the behavior of the data over the business cycle (i.e. the fluctuations) over time.
Discuss any interesting/unique behavior you observe. Make sure to discuss the data
over time, not only the last few years and the impact of Covid-19.
NOTES: There are many interest rates that one can find on FRED. Use the info below to find the
correct interest rates. You want to graph “nominal interest rates”, so do not use “inflation indexed
yields”.
•
•
Long term interest rate, specifically the interest rate on 10 years to maturity T-bonds can
be found by searching for the following title: “Market Yield on U.S. Treasury
Securities at 10-Year Constant Maturity” (daily data is available from 1962 to
present)
Short term interest rate, specifically the interest rate on a 3-month to maturity T-bill can
be found by searching for the following title: “3-Month Treasury Bill Secondary
Market Rate” (daily data is available from 1954 to present)