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Exercise

Obtain Risk-Free Rate Data

A common proxy for the risk-free rate is the yield on US Treasury bonds. You can obtain the yield data from the Federal Reserve Electronic Database (FRED). For this exercise, we will use the yield on a 10-Year Constant Maturity Treasury security. The US Treasury data is stored in the data.frame object labeled treas, which has two variables: date and yield. Because our valuation date is the end of 2016, we need to extract the yield on December 30, 2016, which is the last trading day of 2016 and store it in the object rf.

Instructions

100 XP
  • Extract the yield for "2016-12-30" from treas.
  • Keep only the observation in the yield column.
  • Convert from percentage terms to decimal terms.