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d. Plot the Security Market Line. Select the correct graph. The correct graph is 30(%) 20 10- A. -0.5 -10- -20- Security Market Line 0.5 1.5 2 2.5 3.5 30(%) Security Market Line 20- 10- B. -0.5 -10- D. -20- Beta 0.5 1 1.5 2 2.5 3.5 Beta 30(%) Security Market Line 20 10 -0.5 -10- -20 0.5 1 1.5 2 2.5 3.5 Beta 30(%) 20- Security Market Line 10- -0.5 -10 -20- 0.5 1.5 2 2.5 3.5 Beta 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 9 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. X 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. NYSE Stock X Average return,π Avg % % Standard deviation, σ % % c. Assume that the situation during Years 1 to 7 is expected to prevail in the future (i.e., x = TX, Average ↑ M = TM, Average, and both σx and by 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.

d. Plot the Security Market Line. Select the correct graph. The correct graph is 30(%) 20 10- A. -0.5 -10- -20- Security Market Line 0.5 1.5 2 2.5 3.5 30(%) Security Market Line 20- 10- B. -0.5 -10- D. -20- Beta 0.5 1 1.5 2 2.5 3.5 Beta 30(%) Security Market Line 20 10 -0.5 -10- -20 0.5 1 1.5 2 2.5 3.5 Beta 30(%) 20- Security Market Line 10- -0.5 -10 -20- 0.5 1.5 2 2.5 3.5 Beta 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 9 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. X 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. NYSE Stock X Average return,π Avg % % Standard deviation, σ % % c. Assume that the situation during Years 1 to 7 is expected to prevail in the future (i.e., x = TX, Average ↑ M = TM, Average, and both σx and by 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.

Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter19: Variable Costing (varcost)
Section: Chapter Questions
Problem 5R: Click the Chart sheet tab. This chart is based on the problem data and the two income statements....
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d. Plot the Security Market Line. Select the correct graph. The correct graph is 30(%) 20 10- A. -0.5 -10- -20- Security Market Line 0.5 1.5 2 2.5 3.5 30(%) Security Market Line 20- 10- B. -0.5 -10- D. -20- Beta 0.5 1 1.5 2 2.5 3.5 Beta 30(%) Security Market Line 20 10 -0.5 -10- -20 0.5 1 1.5 2 2.5 3.5 Beta 30(%) 20- Security Market Line 10- -0.5 -10 -20- 0.5 1.5 2 2.5 3.5 Beta 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?
Transcribed Image Text:d. Plot the Security Market Line. Select the correct graph. The correct graph is 30(%) 20 10- A. -0.5 -10- -20- Security Market Line 0.5 1.5 2 2.5 3.5 30(%) Security Market Line 20- 10- B. -0.5 -10- D. -20- Beta 0.5 1 1.5 2 2.5 3.5 Beta 30(%) Security Market Line 20 10 -0.5 -10- -20 0.5 1 1.5 2 2.5 3.5 Beta 30(%) 20- Security Market Line 10- -0.5 -10 -20- 0.5 1.5 2 2.5 3.5 Beta 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 9 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. X 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. NYSE Stock X Average return,π Avg % % Standard deviation, σ % % c. Assume that the situation during Years 1 to 7 is expected to prevail in the future (i.e., x = TX, Average ↑ M = TM, Average, and both σx and by 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.
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 9 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. X 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. NYSE Stock X Average return,π Avg % % Standard deviation, σ % % c. Assume that the situation during Years 1 to 7 is expected to prevail in the future (i.e., x = TX, Average ↑ M = TM, Average, and both σx and by 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.
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