Question 19 A company is planning to invest in a stock with the following samples of stock price history for KKL and MPC. MPC closing stock price MPC Dividend KKL closing stock price 60.938 Date KKL Dividend Dec 00 45.688 48.20 Jan 01 Feb 01 Mar 01 58.00 42.50 53.03 0.18 43.10 0.04 45.16 47.10 Apr 01 May 01 Jun 01 Jul 01 Aug 01 Sep 01 Oct 01 46.19 49.29 47.40 0.18 47.24 0.04 45.00 50.37 44.60 48.67 45.95 0.04 38.37 38.23 46.85 0.18 47.88 Nov 01 46.96 0.18 46.65 0.05 Dec 01 47.15 51.01 The market returns for the twelve months are given below; Date Market Returns Jan 01 Feb 01 6.94% -9.87 Mar 01 4.86 Apr 01 May 01 Jun 01 Jul 01 Aug 01 Sep 01 Oct 01 6.62 -7.64 8.96 -4.45 1.98 4.76 -8.93 Nov 01 -2.55 Dec 01 5.1 a) Calculate the risk associated with investing in these stocks. b) Calculate the correlation coefficient between the two stocks c) Calculate the beta associated with each of these stocks d) Explain the betas of the two stocks
Question 19 A company is planning to invest in a stock with the following samples of stock price history for KKL and MPC. MPC closing stock price MPC Dividend KKL closing stock price 60.938 Date KKL Dividend Dec 00 45.688 48.20 Jan 01 Feb 01 Mar 01 58.00 42.50 53.03 0.18 43.10 0.04 45.16 47.10 Apr 01 May 01 Jun 01 Jul 01 Aug 01 Sep 01 Oct 01 46.19 49.29 47.40 0.18 47.24 0.04 45.00 50.37 44.60 48.67 45.95 0.04 38.37 38.23 46.85 0.18 47.88 Nov 01 46.96 0.18 46.65 0.05 Dec 01 47.15 51.01 The market returns for the twelve months are given below; Date Market Returns Jan 01 Feb 01 6.94% -9.87 Mar 01 4.86 Apr 01 May 01 Jun 01 Jul 01 Aug 01 Sep 01 Oct 01 6.62 -7.64 8.96 -4.45 1.98 4.76 -8.93 Nov 01 -2.55 Dec 01 5.1 a) Calculate the risk associated with investing in these stocks. b) Calculate the correlation coefficient between the two stocks c) Calculate the beta associated with each of these stocks d) Explain the betas of the two stocks
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Question 19
A company is planning to invest in a stock with the following samples of stock price history for
KKL and MPC.
KKL closing
stock price
MPC closing
stock price
45.688
Date
KKL Dividend
MPC Dividend
Dec 00
60.938
48.20
Jan 01
Feb 01
Mar 01
Apr 01
May 01
Jun 01
Jul 01
Aug 01
Sep 01
Oct 01
Nov 01
58.00
42.50
53.03
43.10
47.10
49.29
45.16
0.18
0.04
46.19
47.40
0.18
47.24
0.04
45.00
44.60
50.37
48.67
45.95
0.04
46.85
0.18
38.37
47.88
38.23
46.96
0.18
46.65
0.05
Dec 01
47.15
51.01
The market returns for the twelve months are given below;
Date
Market Returns
Jan 01
Feb 01
6.94%
-9.87
Mar 01
4.86
Apr 01
May 01
Jun 01
Jul 01
Aug 01
Sep 01
Oct 01
6.62
-7.64
8.96
-4.45
1.98
4.76
-8.93
Nov 01
-2.55
Dec 01
5.1
a) Calculate the risk associated with investing in these stocks.
b) Calculate the correlation coefficient between the two stocks
c) Calculate the beta associated with each of these stocks
d) Explain the betas of the two stocks
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