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  1. Collect the monthly interest rate of 1-month Treasury Bills as the proxy for the risk-free rate

for the same time period from the Federal Reserve website: https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15. (Links to an external site.)

  • First, you need to build your package of downloading interest rates. Click on "Build Package" button, which leads you to the "Build your package" webpage.
  • Next, choose in 1. Data Set "Selected Interest Rates", then click "Next";  choose in 2. Instrument "TCMNOM US government securities/Treasury constant maturities/Nominal", then click "Next"; choose in 3. Maturity "M1: 1-month", then click "Next";   choose in 4. Frequency "Monthly", then click "Add to package", leading you to the "Review your package" webpage.
  • Click on "Format package" button, which leads you to the "Format your package" webpage.
  • Choose "Dates" to specify your date range, from July 2009 - June 2014, the same as the data range of stocks from Project 2.
  • Choose "Excel 2003, or newer" in File type, then click "Go to download", which leads to "Download your package" webpage.
  • Click "Download file" to save the excel file containing the interest rates.

NOTICE: the interest rates in the downloaded dataset are already annualized and presented in percentage point format. So when you test with the return data in decimal point, you need to divide the interest rate by 100. Furthermore, since the market and stock returns are monthly, you need to further divide the annualized risk free rate by 12 to obtain the monthly rate to be used in the CAPM regressions. 

 2. Assemble the return data of GE, Merck, Campbell Soup and Apple, as well as that S&P 500 from Project 2 for the testing of CAPM.

 3. Use the Excel regression data tool to test the CAPM following the example in Section D: Linear Regression and CAPM, in which we test the CAPM using MSFT and S&P 500 index returns.

 4. In your report:

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