Investment Options You are a financial planner at a well-known financial plannin
ID: 3046688 • Letter: I
Question
Investment Options
You are a financial planner at a well-known financial planning firm. During a casual family gathering, a relative by the name of Uncle Tom asked you some investment-related questions as he can withdraw about $200,000 worth of cash from his CPF. He queried about the difference between Singapore Government Bonds and Fixed Deposits, as well as how long one should lock in their money.
You explained to Uncle Tom that Singapore Government Securities (SGS) bonds and Treasury bills (T-bills) are marketable debt instruments of the Government of Singapore. These debt instruments are considered safe investments, as they are backed by the full credit of the Singapore Government. As such they are seen as almost risk free because it is very unlikely that a government can go bankrupt and not able to pay its loans. Besides the government has a tax revenue stream it can use to repay its borrowings.
You further explained to Uncle Tom: “Fixed deposits are backed by the credit rating of the bank. Unlike when you borrow from the bank, the bank does not give you any collateral when it borrows from you. However, it is obligated to pay you your interest and principal when it falls due. The bank can however default when it goes bust as we have seen in past years in the Europe and the United States. When a bank fails, depositors may lose all or part of their money, including fixed depositors.”
Based on your hunch, you know that Uncle Tom will be asking more detailed questions and in anticipation, you proceed to download the historical interest rate dataset from the Department of Statistics Singapore.
Please use the Excel software and the data file to answer the following questions.
Question 1
Upon your explanation, Uncle Tom seek your advice on whether the 1-year Treasury Bills yield is essentially the same as a 12-month fixed deposit as they are of the same period. Therefore, according to Uncle Tom, it would make more sense to invest in Treasury Bills as it is deemed more secure. Present the relevant info concisely and clearly for Uncle Tom's appreciation. You are also required to identify and describe the appropriate measures of location and dispersion. Interpret your preliminary observations.
(15 marks)
Question 2
(a) State 95% confidence intervals of the interest rate for the 12-month Fixed Deposit and Government Securities – 1-Year Treasury Bills, separately. Interpret these confidence intervals. With these findings, is Uncle Tom correct in reporting that they both give the same kind of return and hence it is safer to invest in Treasury Bills?
(10 marks)
(b) (c)
List the key assumption(s) you have made in constructing this confidence interval.
Discuss if this/these assumption(s) are reasonable?
Select and explain what your subsequent follow up (including statistical tests) will be
if the key assumption(s) were found to be violated.
Question 3
Uncle Tom is also concerned about the duration of his investment. He is contemplating between the 1-year Treasury Bills and 2-year government bond. He claims that from his many years of observation, the longer the investment period, the higher is the yield. Select an appropriate hypothesis test to determine if Uncle Tom’s claim is true.
You should include the following:
(a) State the null and alternative hypotheses and explain how you develop these two
hypotheses.
(5 marks)
(b) Use and execute the hypothesis testing with = 0.05 by Excel. Present and list the test statistic you use for this test. Explain your decision criteria and inform the outcome to
Uncle Tom.
(15 marks)
(c) Discuss the assumptions you have made in performing the hypothesis test? Are these assumptions reasonable for this case? Please provide explanation/s to substantiate
your view.
Question 4
(10 marks)
(a) Uncle Tom mentioned that his friends once told him that statistics can sometimes be used to mislead. Being a responsible financial planner, you agree with him. Highlight three (3) possible concerns in business or statistical aspects regarding the approach used here. Also, if you have a free hand on the project starting from sampling to analysis, how would you conduct the project analysis and what recommendations would you give for the problem in question? Please keep your answer within 800 words (indicate your word count).
(15 marks)
(b) Provide an executive summary of your analysis to Uncle Tom and advise him within 300 words (indicate your word count). Note that Uncle Tom does not have the same
statistical literacy as you.
(20 marks)
How do I provide or upload the excel file here so a chegg expert can help me solve this question? I'm having a hard time please guide me.
Month/Year 3-month Fixed Deposit Rate 6-month Fixed Deposit Rate 12-month Fixed Deposit Rate Savings Deposit Rate Government Securities - 5-year Bond Yield Government Securities - 2-year Bond Yield Government Securities - 10-year Bond Yield Government Securities - 1-year Treasury Bills Yield Government Securities - 15-year Bond Yield Government Securities - 20-year Bond Yield Jan-08 0.48 0.59 0.79 0.25 1.58 1.38 2.21 1.49 2.89 3.09 Feb-08 0.46 0.55 0.74 0.24 1.65 1.16 2.4 1.34 3.08 3.3 Mar-08 0.42 0.52 0.71 0.24 1.64 0.9 2.27 0.96 3.1 3.39 Apr-08 0.41 0.51 0.71 0.24 1.82 1.03 2.44 1.07 3.16 3.39 May-08 0.42 0.52 0.71 0.24 2.62 1.2 3.51 1.03 3.61 3.9 Jun-08 0.41 0.53 0.73 0.23 2.64 1.23 3.59 0.93 4.02 4.19 Jul-08 0.4 0.54 0.74 0.23 2.01 1.03 3.21 0.68 3.58 3.72 Aug-08 0.39 0.53 0.73 0.23 2.19 1.32 3.19 1.09 3.43 3.57 Sep-08 0.41 0.53 0.73 0.23 2.4 1.49 3.21 1.7 3.45 3.56 Oct-08 0.43 0.55 0.73 0.23 2.02 1.27 2.95 1.19 3.55 3.69 Nov-08 0.41 0.55 0.73 0.23 1.53 0.86 2.29 0.73 2.6 2.86 Dec-08 0.39 0.51 0.7 0.22 1.4 0.83 2.05 0.74 2.33 2.57 Jan-09 0.38 0.49 0.69 0.22 1.4 0.74 2.07 0.48 2.74 3.09 Feb-09 0.37 0.46 0.64 0.21 1.08 0.66 2.06 0.43 2.68 3.06 Mar-09 0.32 0.37 0.58 0.2 1.42 0.62 2.03 0.44 2.59 2.98 Apr-09 0.32 0.36 0.57 0.18 1.34 0.4 2.04 0.31 2.62 3 May-09 0.32 0.36 0.57 0.17 1.29 0.52 2.61 0.33 3.02 3.27 Jun-09 0.27 0.34 0.54 0.17 1.45 0.61 2.59 0.35 3.02 3.2 Jul-09 0.26 0.34 0.53 0.16 1.32 0.49 2.41 0.35 2.9 3.18 Aug-09 0.26 0.34 0.53 0.16 1.32 0.49 2.47 0.37 3.07 3.23 Sep-09 0.26 0.34 0.53 0.16 1.43 0.59 2.45 0.39 3.08 3.19 Oct-09 0.25 0.34 0.53 0.16 1.33 0.61 2.55 0.56 3.19 3.28 Nov-09 0.25 0.34 0.53 0.16 1.31 0.54 2.47 0.51 3.07 3.17 Dec-09 0.25 0.34 0.53 0.15 1.28 0.6 2.66 0.55 3.26 3.34 Jan-10 0.22 0.31 0.51 0.16 1.26 0.63 2.54 0.47 3.2 3.29 Feb-10 0.22 0.31 0.51 0.14 1.3 0.56 2.69 0.39 3.3 3.38 Mar-10 0.22 0.31 0.51 0.14 1.28 0.57 2.83 0.37 3.4 3.47 Apr-10 0.22 0.31 0.51 0.14 1.08 0.45 2.67 0.42 3.23 3.31 May-10 0.21 0.3 0.49 0.14 0.91 0.48 2.79 0.34 3.11 3.22 Jun-10 0.21 0.3 0.48 0.14 0.76 0.44 2.37 0.37 2.88 3.01 Jul-10 0.2 0.29 0.47 0.14 0.59 0.43 1.95 0.35 2.58 2.84 Aug-10 0.2 0.29 0.47 0.14 0.68 0.45 1.99 0.33 2.41 2.81 Sep-10 0.2 0.29 0.47 0.14 0.88 0.41 2.02 0.34 2.41 2.82 Oct-10 0.19 0.28 0.45 0.13 0.89 0.44 1.98 0.41 2.51 2.95 Nov-10 0.19 0.28 0.45 0.13 1.18 0.43 2.29 0.4 2.79 3.1 Dec-10 0.19 0.28 0.45 0.13 1.4 0.51 2.71 0.42 3.01 3.22 Jan-11 0.18 0.26 0.43 0.12 1.16 0.49 2.57 0.4 3.03 3.32 Feb-11 0.18 0.26 0.43 0.12 1.15 0.44 2.6 0.4 3 3.29 Mar-11 0.18 0.26 0.43 0.12 1.19 0.45 2.48 0.35 2.86 3.15 Apr-11 0.18 0.26 0.43 0.12 1.1 0.47 2.41 0.44 2.78 3 May-11 0.18 0.26 0.43 0.12 1.14 0.45 2.39 0.42 2.74 2.95 Jun-11 0.18 0.26 0.43 0.12 0.99 0.43 2.31 0.41 2.74 2.96 Jul-11 0.18 0.26 0.43 0.12 0.59 0.22 2.02 0.28 2.48 2.77 Aug-11 0.17 0.24 0.39 0.12 0.5 0.18 1.64 0.18 2.04 2.33 Sep-11 0.16 0.23 0.38 0.12 0.53 0.14 1.62 0.21 1.92 2.08 Oct-11 0.15 0.21 0.34 0.11 0.59 0.26 1.75 0.29 2.11 2.35 Nov-11 0.14 0.19 0.32 0.11 0.58 0.22 1.68 0.31 2.07 2.33 Dec-11 0.14 0.19 0.32 0.11 0.6 0.35 1.63 0.37 2.09 2.36 Jan-12 0.13 0.19 0.29 0.11 0.49 0.3 1.54 0.34 2 2.27 Feb-12 0.13 0.19 0.29 0.11 0.62 0.27 1.48 0.34 1.95 2.31 Mar-12 0.13 0.19 0.29 0.11 0.64 0.16 1.66 0.32 2.09 2.46 Apr-12 0.13 0.19 0.29 0.11 0.54 0.19 1.55 0.26 1.99 2.31 May-12 0.13 0.19 0.29 0.11 0.55 0.24 1.46 0.28 1.93 2.28 Jun-12 0.14 0.19 0.3 0.11 0.42 0.16 1.61 0.27 1.92 2.26 Jul-12 0.14 0.19 0.3 0.11 0.43 0.18 1.4 0.23 1.67 2 Aug-12 0.14 0.2 0.32 0.11 0.4 0.21 1.38 0.25 1.92 2.09 Sep-12 0.14 0.2 0.32 0.11 0.42 0.32 1.47 0.3 2.03 2.2 Oct-12 0.14 0.2 0.32 0.11 0.38 0.26 1.34 0.28 1.93 2.1 Nov-12 0.14 0.2 0.32 0.11 0.41 0.28 1.3 0.27 1.91 2.09 Dec-12 0.14 0.2 0.32 0.11 0.31 0.28 1.3 0.27 1.91 2.09 Jan-13 0.14 0.2 0.32 0.11 0.4 0.29 1.42 0.27 2.15 2.3 Feb-13 0.14 0.2 0.32 0.11 0.37 0.2 1.52 0.26 2.16 2.37 Mar-13 0.14 0.2 0.32 0.11 0.54 0.23 1.54 0.27 2.19 2.4 Apr-13 0.14 0.2 0.32 0.1 0.47 0.2 1.37 0.26 1.92 2.13 May-13 0.14 0.2 0.32 0.1 0.96 0.3 1.81 0.27 2.39 2.56 Jun-13 0.14 0.2 0.32 0.1 1.17 0.21 2.51 0.29 2.82 2.91 Jul-13 0.14 0.2 0.32 0.1 0.88 0.22 2.47 0.28 2.98 3.17 Aug-13 0.14 0.2 0.32 0.1 1.08 0.25 2.67 0.28 3.15 3.43 Sep-13 0.14 0.2 0.32 0.1 0.92 0.43 2.35 0.29 2.85 3.06 Oct-13 0.14 0.2 0.32 0.1 0.69 0.35 2.15 0.28 2.63 2.94 Nov-13 0.14 0.2 0.32 0.1 0.63 0.36 2.4 0.28 2.92 3.19 Dec-13 0.14 0.2 0.32 0.1 1.08 0.37 2.56 0.3 2.98 3.05 Jan-14 0.15 0.22 0.33 0.12 1.57 0.41 2.46 0.34 2.88 3.13 Feb-14 0.15 0.22 0.33 0.12 1.43 0.36 2.46 0.31 2.87 3.18 Mar-14 0.15 0.22 0.33 0.12 1.54 0.53 2.49 0.34 2.86 3.15 Apr-14 0.15 0.22 0.33 0.12 1.45 0.44 2.42 0.35 2.8 3.05 May-14 0.15 0.22 0.33 0.12 1.3 0.41 2.24 0.34 2.63 2.92 Jun-14 0.14 0.2 0.31 0.11 1.19 0.39 2.32 0.34 2.91 2.99 Jul-14 0.14 0.2 0.31 0.11 1.27 0.44 2.46 0.34 2.86 2.91 Aug-14 0.14 0.2 0.31 0.11 1.3 0.51 2.27 0.34 2.64 2.75 Sep-14 0.14 0.2 0.31 0.11 1.67 0.59 2.47 0.35 2.86 2.95 Oct-14 0.14 0.2 0.31 0.11 1.47 0.47 2.29 0.38 2.69 2.84 Nov-14 0.14 0.2 0.31 0.11 1.44 0.54 2.19 0.41 2.56 2.72 Dec-14 0.14 0.21 0.31 0.11 1.6 0.64 2.28 0.72 2.62 2.78 Jan-15 0.15 0.21 0.32 0.11 1.37 0.84 1.88 0.73 2.22 2.27 Feb-15 0.16 0.22 0.32 0.11 1.62 1.03 2.23 0.82 2.53 2.68 Mar-15 0.17 0.23 0.33 0.11 1.83 1.31 2.27 1.06 2.54 2.75 Apr-15 0.17 0.22 0.33 0.11 1.59 1.07 2.25 1 2.51 2.7 May-15 0.16 0.22 0.32 0.11 1.7 1.02 2.42 0.97 2.67 2.81 Jun-15 0.16 0.22 0.32 0.11 2 0.91 2.69 0.96 2.93 3.05 Jul-15 0.16 0.22 0.33 0.11 2.04 1.02 2.63 0.94 2.91 2.98 Aug-15 0.17 0.23 0.33 0.14 2.17 1.11 2.85 0.99 3.16 3.17 Sep-15 0.18 0.23 0.34 0.14 2 1.35 2.54 1.34 2.83 2.83 Oct-15 0.17 0.23 0.34 0.14 1.86 1.25 2.46 1.29 2.74 2.77 Nov-15 0.17 0.23 0.34 0.14 1.95 1.21 2.51 1.13 2.79 2.84 Dec-15 0.18 0.24 0.34 0.14 1.9 1.07 2.6 1.01 2.9 2.94 Jan-16 0.19 0.25 0.35 0.14 1.89 1.1 2.26 1.09 2.61 2.65 Feb-16 0.19 0.25 0.35 0.14 1.85 1.04 2.28 1.05 2.68 2.74 Mar-16 0.19 0.25 0.35 0.14 1.45 0.81 1.84 0.95 2.23 2.33 Apr-16 0.19 0.25 0.35 0.14 1.61 1.02 2 0.99 2.37 2.44 May-16 0.19 0.25 0.35 0.14 1.79 1.08 2.24 0.91 2.51 2.55 Jun-16 0.19 0.25 0.35 0.14 1.51 1.02 1.91 0.88 2.19 2.27 Jul-16 0.19 0.25 0.35 0.14 1.43 0.95 1.81 0.88 2.08 2.19 Aug-16 0.19 0.25 0.35 0.14 1.32 0.85 1.8 0.8 2.08 2.15 Sep-16 0.19 0.25 0.35 0.14 1.32 0.92 1.78 0.79 2.04 2.12 Oct-16 0.19 0.25 0.35 0.14 1.34 0.88 1.89 0.93 2.18 2.28 Nov-16 0.19 0.25 0.35 0.14 1.7 1.1 2.3 0.92 2.67 2.75 Dec-16 0.19 0.25 0.35 0.14 1.85 1.31 2.47 1.13 2.74 2.73 Jan-17 0.15 0.2 0.33 0.18 1.73 1.29 2.3 1.05 2.59 2.68 Feb-17 0.15 0.2 0.33 0.18 1.59 1.23 2.31 1 2.43 2.41 Mar-17 0.14 0.2 0.33 0.16 1.76 1.32 2.25 1.02 2.38 2.43 Apr-17 0.14 0.2 0.33 0.16 1.59 1.21 2.13 1.04 2.28 2.37 May-17 0.14 0.2 0.33 0.16 1.56 1.21 2.08 1.04 2.24 2.34Explanation / Answer
Being a chegg expert,till now what I have encountered is that no one has been able to upload any separate data file with the problem that they are posting. All we get is am image of the data sheet.
The same thing is happenning in your case as well.
I will suggest you to connect to Chegg and let them know this problem. You may mail them the problem or connect them over phone.
In your case we really need the data file cause the data is not small enough so that we could help you by writing the data separately in our own excel file, as we used to do for other similar problems.
Please contact them and report this issue so that they can fix it as soon as possible.
Best Wishes.
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