Financial Analysis Exercise #$3(100$ Points$)$

Background

Financial Analysis Exercise #$3$ will build on exercise #$2$ and the sector$/$industry analysis. This exercise #$3$ is due by the end of Module $6.$

In this exercise, it will require selection of $3$ firms with each sector$/$industry analyzed to invest $$10,000,000$ of a special portfolio into both stocks and bonds evenly. The objective of the portfolio is to produce superior returns to those of the S&P $500$ over the next $12$ months.

Therefore, givh the economic environment, the sector sensitivity and performance expected, $3$ firms will need to be selected per industry that will outperform their sector.

Requirements

In order to meet all the requirements for the financial analysis exercise #$3,$ you are required to complete the following tasks:

Select stocks and bonds to purchase based on sector and industry analysis

Use $3$ methods to calculate relative value of stocks: dividend discount, Gordon model and $\frac{P}{E}$ or other approved method.

Obtain the consensus earnings forecast for the firms

Explain how this will affect the expected future price

Obtain a consensus interest rate forecast

How will this effect bond prices?

How will this affect the roll down the yield curve?