Our Services

Get 15% Discount on your First Order

risk-return Assignment 2 a. Use the year-end stock price data given to calculate annual returns for Bartman, Reynolds, and the Market Index, and the

February 6, 2024

risk-return

Assignment 2
a. Use the year-end stock price data given to calculate annual returns for Bartman, Reynolds, and the Market Index, and then calculate average returns over the five-year period. Remember, returns are calculated by subtracting the beginning price (previous year year-end price) from the ending price (current year year-end price) to get the capital gain or loss, adding the dividend to the capital gain or loss, and dividing the result by the beginning price (previous year year-end price). Assume that dividends are already included in the index., so in your calculation of index return, you don’t need to add the dividend. Also, you cannot calculate the rate of return for 2002 because you do not have 2001 data.)
Data as given in the problem are shown below:
	Bartman Industries		Reynolds Incorporated		Market Index
Year	Stock Price	Dividend	Stock Price	Dividend	Includes Divs.
2007	$17.250	$1.150	$48.750	$3.000	11,663.98
2006	14.750	1.060	52.300	2.900	8,785.70
2005	16.500	1.000	48.750	2.750	8,679.98
2004	10.750	0.950	57.250	2.500	6,434.03
2003	11.375	0.900	60.000	2.250	5,602.28
2002	7.625	0.850	55.750	2.000	4,705.97
We now calculate the rates of return for the two companies and the index:
	Bartman	Reynolds	Index
2007
	Kenneth D. Jackson: Change in stock price plus any dividends, divided by the previous stock price	2006
2005
2004
2003
Average
Note: To get the average, you could get the column sum and divide by 5, but you could also use the function wizard, fx. Click fx, then statistical, then Average, and then use the mouse to select the proper range. Do this for Bartman and then copy the cell for the other items.
b. Calculate the standard deviation of the returns for Bartman, Reynolds, and the Market Index. (Hint: Use the sample standard deviation formula given in the chapter, which corresponds to the STDEV function in Excel.)
Use the function wizard to calculate the standard deviations.
		Bartman	Reynolds	Index
Standard deviation of returns
c. Now calculate the coefficients of variation Bartman, Reynolds, and the Market Index.
		Bartman	Reynolds	Index
Coefficient of Variation
d. Estimate Bartman’s and Reynolds’s betas as the slope of a regression with stock return on the vertical axis (y-axis) and market return on the horizontal axis (x-axis). (Hint: use Excel’s SLOPE function.)
	Bartman’s beta =
	Reynolds’ beta =
e. The risk-free rate on long-term Treasury bonds is 6.04%. Assume that the market risk premium is 5%. What is the expected return on the market? Now use the SML equation to calculate the two companies required returns.
Market risk premium (RPM)=		5.000%
Risk-free rate =		6.040%
Expected return on market =		Risk-free rate	+	Market risk premium
	=		+
	=
Bartman:
Required return	=		+		x
	=
Reynolds:
Required return	=		+		x
	=
f. If you formed a portfolio that consisted of 50% Bartman and 50% Reynolds, what would be its beta and its required return?
The beta of a portfolio is simply a weighted average of the betas of the stocks in the portfolio, so this portfolio’s beta
would be:
Portfolio beta =
g. Suppose an investor wants to include Bartman Industries’ stock in his or her portfolio. Stocks A, B, and C are currently in the portfolio, and their betas are 0.769, 0.985, and 1.423, respectively. Calculate the new portfolio’s required return if it consists of 25 percent of Bartman, 15 percent of Stock A, 40 percent of Stock B, and 20 percent of Stock C.
		Beta	Portfolio Weight
	Bartman		25%
	Stock A	0.769	15%
	Stock B	0.985	40%
	Stock C	1.423	20%
			100%
	Portfolio Beta =
Required return on portfolio:		=	Risk-free rate +	Market Risk Premium *	* Beta
		=
		=

>Business & Finance homework help

Share This Post

Order a Similar Paper and get 15% Discount on your First Order

Related Questions

follow the requirement This file is too large to display.View in new window

CASE1/FIN 501 Strategic Corporate Finance Module 1 CASE Present Value And The Risk/Return Trade-Off Assignment Expectations Answer the assignment questions

CASE1/FIN 501 Strategic Corporate Finance Module 1 CASE Present Value And The Risk/Return Trade-Off Assignment Expectations Answer the assignment questions directly.Stay focused on the precise assign

THE RESUME NEEDS TO BE A PROFESSIONAL ULTRASOUND TECHNICIAN RESUME FOR THE FUTURE. ill add my jobs i had in the past to it. But please make this detailed and

THE RESUME NEEDS TO BE A PROFESSIONAL ULTRASOUND TECHNICIAN RESUME FOR THE FUTURE. ill add my jobs i had in the past to it. But please make this detailed and professional for ultrasound techician. An

Please open pdf Students will write a 2-3 pages essay analyzing one of the chapters addressed during the semester for the book of Fernando Savater.

Please open pdf Students will write a 2-3 pages essay analyzing one of the chapters addressed during the semester for the book of Fernando Savater. The student will be free to choose any of the chapters or authors discussed duringclass as well as his/her opinion about it. The writing will

Using the materials from class, discuss what information will be critical to you in reviewing and evaluating an intervention/instructional program. What

Using the materials from class, discuss what information will be critical to you in reviewing and evaluating an intervention/instructional program. What factors may be positively or negatively associated with the outcomes of your training/staff development? What data will you need to collect to support your evaluation? How will you base

Climate Change Witness 2 In this week’s climate change witness video, you will hear from my friend Chloe, who is a climate

Climate Change Witness 2 In this week’s climate change witness video, you will hear from my friend Chloe, who is a climate scientist who focuses on human health. Her specialty area is how heat impacts maternal health. She is also a Christian and is involved in the work she is

Schedule a Post-Observation Conference with your cooperating teacher no later than 24 hours after the Formal Lesson Observation 1. Share your

Schedule a Post-Observation Conference with your cooperating teacher no later than 24 hours after the Formal Lesson Observation 1. Share your self-evaluation (JUST DOMAIN 3) using Touro Rubric with evidence Download Touro Rubric with evidence from your lesson you taught 2. Ask the cooperating teacher to provide specific feedback based on

Provide character reference letter addressed to Transportation Security Administration for a close friend Frank Wright for 20 plus years since middle

Provide character reference letter addressed to Transportation Security Administration for a close friend Frank Wright for 20 plus years since middle school. Frank has been an asset to me in the long years of friendship, also to the community and any organization. I’ve watched with admirably as Frank pursued a

Some entrepreneurs will identify a problem a community has and then attempt to solve the problem that they, themselves, believe is important. However, the

Some entrepreneurs will identify a problem a community has and then attempt to solve the problem that they, themselves, believe is important. However, the community being served may not view the entrepreneur’s perceived problem to be an issue and may not support a proposed solution. It is critical that the

Defining a business strategy is part of the strategic planning process and is necessary for achieving the company’s goals and objectives. The steps

Defining a business strategy is part of the strategic planning process and is necessary for achieving the company’s goals and objectives. The steps involved in creating a business strategy are critical and it is imperative that the appropriate amount of time is spent in getting it just right. As the

Assignment Content Social media marketing is one of the fastest growing areas of the marketing world. Choose a network, such as Facebook, LinkedIn, Pinterest,

Assignment Content Social media marketing is one of the fastest growing areas of the marketing world. Choose a network, such as Facebook, LinkedIn, Pinterest, or Instagram, and explain how you have be

Assignment: Referral Notebook Completion requirements Directions Compile a list of at least 15 counseling

Assignment: Referral Notebook Completion requirements Directions Compile a list of at least 15 counseling referral contacts in your local community. These referral entries should include the name, contact information, Christian affiliation (or not), and specific expertise of each referral contact. If your future ministry context is not certain, choose a

Purpose of Study As a policy researcher, the Congressional Budget Office (CBO) has asked you to explore a new dataset called the General Social Survey.

Purpose of Study As a policy researcher, the Congressional Budget Office (CBO) has asked you to explore a new dataset called the General Social Survey. The CBO would like you to conduct a preliminary statistical analysis to describe the sample characteristics in the dataset and write a report for the

Read 1. Chapter 15: A Unique University Design in the innovative university: Changing the DNA of higher education from the

Read 1. Chapter 15: A Unique University Design in the innovative university: Changing the DNA of higher education from the inside out. 2. Chapter 16: Getting Started in the innovative university: Changing the DNA of higher education from the inside out. Discussion Question: Please provide at least a 250-word response,

Create a PowerPoint to address the following. Be sure to include in-depth discussion in the NOTES section of each slide. 1. Explain the relationship of

Create a PowerPoint to address the following. Be sure to include in-depth discussion in the NOTES section of each slide. 1. Explain the relationship of the port number to an IP address. What are the different classes o f IP address? 2. What is the difference between VoIP and VoWLAN?