Foundations of Finance (9th Edition) (Pearson Series in Finance)
9th Edition
ISBN: 9780134083285
Author: Arthur J. Keown, John D. Martin, J. William Petty
Publisher: PEARSON
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Chapter 6, Problem 4MC
Summary Introduction
To discuss: The nature of relationship between the stock returns for Company W and S&P and with Company T and S&P.
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Using the data in the following table,, estimate the:
a. Average return and volatility for each stock.
b. Covariance between the stocks.
c. Correlation between these two stocks.
a. Estimate the average return and volatility for each stock.
The average return of stock A is
%. (Round to two decimal places.)
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Year
Stock A
2010
2011
2012
2013
2014
2015
- 1%
6%
2%
-5%
4%
6%
Stock B
20%
9%
8%
-3%
- 5%
21%
Print
Done
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Using the data in the following table,, estimate the:
a. Average return and volatility for each stock.
b. Covariance between the stocks.
c. Correlation between these two stocks.
a. Estimate the average return and volatility for each stock.
The average return of stock A is %. (Round to two decimal places.)
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Year
2010
2011
20%
2013
- 1%
- 13%
Stock A
Stock B
20%
12%
- 9%
Print
2012
8%
9%
C
Done
2014
4%
- 9%
2015
11%
27%
- X
Given the following information on five stocks, construct: a. A simple price-weighted average b. A value-weighted
average c. A geometric average d. What is the percentage increase in each average if the stock prices change to those in
Column I? e. What is the percentage increase in each average if the stock prices change from those in the Price column to
those in Column II? f. Why were the percentage changes different in parts (d) and (e)? g. If you were managing a fund and
wanted a source to compare your results to, which of the three averages would you prefer to use, and why?
Stock Price
# of Shares I
II
A
B
C
D
E
F
$12.00 150,000
$14.00
125,000
$11.00 200,000
$ 22.00 80,000
$8.00
30,000
$29.00 140,000
$12.00
$12.00
$14.00 $14.00
$20.00 $11.00
$ 22,00 $ 22.00
$8.00
$15.00
$29.00 $29.00
Chapter 6 Solutions
Foundations of Finance (9th Edition) (Pearson Series in Finance)
Ch. 6 - a. What is meant by the investors required rate of...Ch. 6 - Prob. 2RQCh. 6 - What is a beta? How is it used to calculate r, the...Ch. 6 - Prob. 4RQCh. 6 - Prob. 5RQCh. 6 - Prob. 6RQCh. 6 - Prob. 7RQCh. 6 - What effect will diversifying your portfolio have...Ch. 6 - (Expected return and risk) Universal Corporation...Ch. 6 - (Average expected return and risk) Given the...
Ch. 6 - (Expected rate of return and risk) Carter, Inc. is...Ch. 6 - (Expected rate of return and risk) Summerville,...Ch. 6 - Prob. 5SPCh. 6 - Prob. 9SPCh. 6 - Prob. 10SPCh. 6 - Prob. 11SPCh. 6 - Prob. 12SPCh. 6 - (Capital asset pricing model) Using the CAPM,...Ch. 6 - Prob. 16SPCh. 6 - Prob. 17SPCh. 6 - a. Compute an appropriate rate of return for Intel...Ch. 6 - (Estimating beta) From the graph in the right...Ch. 6 - Prob. 20SPCh. 6 - Prob. 21SPCh. 6 - (Capital asset pricing model) The expected return...Ch. 6 - (Portfolio beta and security market line) You own...Ch. 6 - (Portfolio beta) Assume you have the following...Ch. 6 - Prob. 1MCCh. 6 - Prob. 2MCCh. 6 - Prob. 3MCCh. 6 - Prob. 4MCCh. 6 - Prob. 5MCCh. 6 - Prob. 6MCCh. 6 - Prob. 7MCCh. 6 - Prob. 8MCCh. 6 - Prob. 9MCCh. 6 - Prob. 10MCCh. 6 - Prob. 11MC
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