You are given the following set of data: HISTORICAL RATES OF RETURN Year NYSE Stock X 1 - 26.5% - 22.0% 2 37.2 15.0 3 23.8 10.0 4 - 7.2 4.0 5 6.6 11.8 6 7 20.5 30.6 18.9 17.6 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. Use a spreadsheet (or a calculator with a linear regression function) to determine Stock X's beta coefficient. Do not round intermediate calculations. Round your answer to two decimal places. Beta = b. Determine the arithmetic average rates of return for Stock X and the NYSE over the period given. Calculate the standard deviations of returns for both Stock X and the NYSE. Do not round intermediate calculations. Round your answers to two decimal places. Average return, Aug Standard deviation, σ NYSE Stock X % % % % d. Plot the Security Market Line. Select the correct graph. The correct graph is Security Market Line 10- 10- 10- 05 Security Market Line (%) Security Market Line Security Market Line 201 Beta Beta c. Assume that the situation during Years 1 to 7 is expected to prevail in the future (i.e., x = FX,Average MTM,Average, and both σx and bx in the future will equal their past values). Also assume that Stock X is in equilibrium - that is, it plots on the Security Market Line. What is the risk-free rate? Do not round intermediate calculations. Round your answer to two decimal places. % d. Plot the Security Market Line. 05 Вета e. Suppose you hold a large, well-diversified portfolio and are considering adding to that portfolio either Stock X or another stock, Stock Y, which has the same beta as Stock X but a higher standard deviation of returns. Stocks X and Y have the same expected returns: fx- fy 10.6%. Which stock should you choose?
You are given the following set of data: HISTORICAL RATES OF RETURN Year NYSE Stock X 1 - 26.5% - 22.0% 2 37.2 15.0 3 23.8 10.0 4 - 7.2 4.0 5 6.6 11.8 6 7 20.5 30.6 18.9 17.6 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. Use a spreadsheet (or a calculator with a linear regression function) to determine Stock X's beta coefficient. Do not round intermediate calculations. Round your answer to two decimal places. Beta = b. Determine the arithmetic average rates of return for Stock X and the NYSE over the period given. Calculate the standard deviations of returns for both Stock X and the NYSE. Do not round intermediate calculations. Round your answers to two decimal places. Average return, Aug Standard deviation, σ NYSE Stock X % % % % d. Plot the Security Market Line. Select the correct graph. The correct graph is Security Market Line 10- 10- 10- 05 Security Market Line (%) Security Market Line Security Market Line 201 Beta Beta c. Assume that the situation during Years 1 to 7 is expected to prevail in the future (i.e., x = FX,Average MTM,Average, and both σx and bx in the future will equal their past values). Also assume that Stock X is in equilibrium - that is, it plots on the Security Market Line. What is the risk-free rate? Do not round intermediate calculations. Round your answer to two decimal places. % d. Plot the Security Market Line. 05 Вета e. Suppose you hold a large, well-diversified portfolio and are considering adding to that portfolio either Stock X or another stock, Stock Y, which has the same beta as Stock X but a higher standard deviation of returns. Stocks X and Y have the same expected returns: fx- fy 10.6%. Which stock should you choose?
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter20: Activity-based Costing (abc)
Section: Chapter Questions
Problem 5R
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Transcribed Image Text:You are given the following set of data:
HISTORICAL RATES OF RETURN
Year
NYSE
Stock X
1
- 26.5%
- 22.0%
2
37.2
15.0
3
23.8
10.0
4
- 7.2
4.0
5
6.6
11.8
6
7
20.5
30.6
18.9
17.6
The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the
required analysis to answer the questions below.
Open spreadsheet
a. Use a spreadsheet (or a calculator with a linear regression function) to determine Stock X's beta
coefficient. Do not round intermediate calculations. Round your answer to two decimal places.
Beta =
b. Determine the arithmetic average rates of return for Stock X and the NYSE over the period given.
Calculate the standard deviations of returns for both Stock X and the NYSE. Do not round intermediate
calculations. Round your answers to two decimal places.
Average return, Aug
Standard deviation, σ
NYSE
Stock X
%
%
%
%
d. Plot the Security Market Line.
Select the correct graph.
The correct graph is
Security Market Line
10-
10-
10-
05
Security Market Line
(%)
Security Market Line
Security Market Line
201
Beta
Beta
c. Assume that the situation during Years 1 to 7 is expected to prevail in the future (i.e.,
x = FX,Average
MTM,Average, and both σx and bx in the future will equal their past values). Also assume that Stock
X is in equilibrium - that is, it plots on the Security Market Line. What is the risk-free rate? Do not round
intermediate calculations. Round your answer to two decimal places.
%
d. Plot the Security Market Line.
05
Вета
e. Suppose you hold a large, well-diversified portfolio and are considering adding to that portfolio either Stock X or another stock,
Stock Y, which has the same beta as Stock X but a higher standard deviation of returns. Stocks X and Y have the same expected
returns:
fx-
fy 10.6%. Which stock should you choose?
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