Loose-Leaf Essentials of Investments
Loose-Leaf Essentials of Investments
10th Edition
ISBN: 9781259604966
Author: Kane, Alex, Marcus Professor, Alan J., Bodie Professor, Zvi
Publisher: McGraw-Hill Education
bartleby

Videos

Question
Book Icon
Chapter 7, Problem 1WM
Summary Introduction

To show:

The data of company Alcoa and data of returns on S&P.

Expert Solution
Check Mark

Explanation of Solution

The data for returns of Alcoa is shown below:

    Date Returns Alcoa
    12/1/2013 0
    1/1/2014 0
    2/1/2014 0.019785587
    3/1/2014 0.094520691
    4/1/2014 0.045565745
    5/1/2014 0.010340052
    6/1/2014 0.09213958
    7/1/2014 0.09598186
    8/1/2014 0.013333413
    9/1/2014 -0.029980428
    10/1/2014 0.040797065
    11/1/2014 0.031133233
    12/1/2014 -0.088938172
    1/1/2015 -0.008906032
    2/1/2015 -0.056519624
    3/1/2015 -0.133367024
    4/1/2015 0.037969704
    5/1/2015 -0.071017427
    6/1/2015 -0.112097041
    7/1/2015 -0.121939527
    8/1/2015 -0.043485446
    9/1/2015 0.025067099
    10/1/2015 -0.078577301
    11/1/2015 0.047029033
    12/1/2015 0.056257819
    1/1/2016 -0.302996218
    2/1/2016 0.202912827
    3/1/2016 0.074574737
    4/1/2016 0.153553957
    5/1/2016 -0.18644828
    6/1/2016 0.002902807
    7/1/2016 0.135955619
    8/1/2016 -0.052185714
    9/1/2016 0.008845955
    10/1/2016 -0.12794767
    11/1/2016 0.301002453
    12/1/2016 -0.027282474
    1/1/2017 0.260883907
    2/1/2017 -0.052376863
    3/1/2017 -0.005508
    4/1/2017 -0.019668973
    5/1/2017 -0.023699955
    6/1/2017 -0.008842777
    7/1/2017 0.108723913
    8/1/2017 0.186889829
    9/1/2017 0.060570954
    10/1/2017 0.024577509
    11/1/2017 -0.121820059
    12/1/2017 0.241786656
    1/1/2018 -0.034945458
    2/1/2018 -0.145632637
    3/1/2018 -0.00022244
    4/1/2018 0.129966368
    5/1/2018 -0.06308127
    6/1/2018 -0.025067115
    7/1/2018 -0.080131612
    8/1/2018 0.031842536
    9/1/2018 -0.100472256
    10/1/2018 -0.143767471
    11/1/2018 -0.095281689
    12/1/2018 -0.098711084
    12/7/2018 0
Summary Introduction

To show:

The data of returns on S&P.

Expert Solution
Check Mark

Explanation of Solution

The data for returns of S&P is shown below:

    Date Returns S&P
    12/1/2013 0
    1/1/2014 0
    2/1/2014 0.042213375
    3/1/2014 0.006908249
    4/1/2014 0.006181643
    5/1/2014 0.020812196
    6/1/2014 0.018878997
    7/1/2014 -0.015194687
    8/1/2014 0.036963644
    9/1/2014 -0.015635436
    10/1/2014 0.022936399
    11/1/2014 0.024237474
    12/1/2014 -0.004197385
    1/1/2015 -0.031532779
    2/1/2015 0.053438876
    3/1/2015 -0.017549197
    4/1/2015 0.008484722
    5/1/2015 0.01043673
    6/1/2015 -0.021235559
    7/1/2015 0.019549683
    8/1/2015 -0.064624731
    9/1/2015 -0.026798731
    10/1/2015 0.079719379
    11/1/2015 0.000504742
    12/1/2015 -0.017685659
    1/1/2016 -0.052067617
    2/1/2016 -0.004136906
    3/1/2016 0.06390499
    4/1/2016 0.002695762
    5/1/2016 0.015208367
    6/1/2016 0.000910506
    7/1/2016 0.034990433
    8/1/2016 -0.001219987
    9/1/2016 -0.001235213
    10/1/2016 -0.019616837
    11/1/2016 0.033603545
    12/1/2016 0.018037111
    1/1/2017 0.017726315
    2/1/2017 0.036523001
    3/1/2017 -0.000389273
    4/1/2017 0.009050132
    5/1/2017 0.011509759
    6/1/2017 0.004802226
    7/1/2017 0.019164018
    8/1/2017 0.000546284
    9/1/2017 0.019119039
    10/1/2017 0.02194556
    11/1/2017 0.003713141
    12/1/2017 0.033766015
    1/1/2018 0.054657399
    2/1/2018 -0.039726108
    3/1/2018 -0.027252497
    4/1/2018 0.002715086
    5/1/2018 0.021378191
    6/1/2018 0.004830749
    7/1/2018 0.035387951
    8/1/2018 0.029814315
    9/1/2018 0.004285093
    10/1/2018 -0.071929346
    11/1/2018 0.017701752
    12/1/2018 -0.047137951
    12/7/2018 0

c

Summary Introduction

In this step we have to calculate the excess returns of the stock Alcoa and S&P separately.

c

Expert Solution
Check Mark

Explanation of Solution

The excess returns can be calculated by =

Excess return = Return on stock − T bill rate

Here is the sheet in which we have calculaed the excess returns:

    Date Returns Alcoa Returns S&P T-Bill rate Excess Return on Alcoa Excess Return on S&P
    12/1/2013 0 0 0.07 -0.07 -0.07
    1/1/2014 0 0 0.07 -0.07 -0.07
    2/1/2014 0.019785587 0.042213375 0.04 -0.02 0.00
    3/1/2014 0.094520691 0.006908249 0.05 0.04 -0.04
    4/1/2014 0.045565745 0.006181643 0.05 0.00 -0.04
    5/1/2014 0.010340052 0.020812196 0.03 -0.02 -0.01
    6/1/2014 0.09213958 0.018878997 0.03 0.06 -0.01
    7/1/2014 0.09598186 -0.015194687 0.04 0.06 -0.06
    8/1/2014 0.013333413 0.036963644 0.03 -0.02 0.01
    9/1/2014 -0.029980428 -0.015635436 0.03 -0.06 -0.05
    10/1/2014 0.040797065 0.022936399 0.02 0.02 0.00
    11/1/2014 0.031133233 0.024237474 0.02 0.01 0.00
    12/1/2014 -0.088938172 -0.004197385 0.02 -0.11 -0.02
    1/1/2015 -0.008906032 -0.031532779 0.03 -0.04 -0.06
    2/1/2015 -0.056519624 0.053438876 0.03 -0.09 0.02
    3/1/2015 -0.133367024 -0.017549197 0.02 -0.15 -0.04
    4/1/2015 0.037969704 0.008484722 0.03 0.01 -0.02
    5/1/2015 -0.071017427 0.01043673 0.02 -0.09 -0.01
    6/1/2015 -0.112097041 -0.021235559 0.02 -0.13 -0.04
    7/1/2015 -0.121939527 0.019549683 0.02 -0.14 0.00
    8/1/2015 -0.043485446 -0.064624731 0.03 -0.07 -0.09
    9/1/2015 0.025067099 -0.026798731 0.07 -0.04 -0.10
    10/1/2015 -0.078577301 0.079719379 0.02 -0.10 0.06
    11/1/2015 0.047029033 0.000504742 0.02 0.03 -0.02
    12/1/2015 0.056257819 -0.017685659 0.12 -0.06 -0.14
    1/1/2016 -0.302996218 -0.052067617 0.23 -0.53 -0.28
    2/1/2016 0.202912827 -0.004136906 0.26 -0.06 -0.26
    3/1/2016 0.074574737 0.06390499 0.31 -0.24 -0.25
    4/1/2016 0.153553957 0.002695762 0.29 -0.14 -0.29
    5/1/2016 -0.18644828 0.015208367 0.23 -0.42 -0.21
    6/1/2016 0.002902807 0.000910506 0.27 -0.27 -0.27
    7/1/2016 0.135955619 0.034990433 0.27 -0.13 -0.24
    8/1/2016 -0.052185714 -0.001219987 0.30 -0.35 -0.30
    9/1/2016 0.008845955 -0.001235213 0.30 -0.29 -0.30
    10/1/2016 -0.12794767 -0.019616837 0.29 -0.42 -0.31
    11/1/2016 0.301002453 0.033603545 0.33 -0.03 -0.30
    12/1/2016 -0.027282474 0.018037111 0.45 -0.48 -0.43
    1/1/2017 0.260883907 0.017726315 0.51 -0.25 -0.49
    2/1/2017 -0.052376863 0.036523001 0.51 -0.56 -0.47
    3/1/2017 -0.005508 -0.000389273 0.52 -0.53 -0.52
    4/1/2017 -0.019668973 0.009050132 0.74 -0.76 -0.73
    5/1/2017 -0.023699955 0.011509759 0.80 -0.82 -0.79
    6/1/2017 -0.008842777 0.004802226 0.89 -0.90 -0.89
    7/1/2017 0.108723913 0.019164018 0.98 -0.87 -0.96
    8/1/2017 0.186889829 0.000546284 1.07 -0.88 -1.07
    9/1/2017 0.060570954 0.019119039 1.01 -0.95 -0.99
    10/1/2017 0.024577509 0.02194556 1.03 -1.01 -1.01
    11/1/2017 -0.121820059 0.003713141 1.07 -1.19 -1.07
    12/1/2017 0.241786656 0.033766015 1.23 -0.99 -1.20
    1/1/2018 -0.034945458 0.054657399 1.32 -1.35 -1.27
    2/1/2018 -0.145632637 -0.039726108 1.41 -1.56 -1.45
    3/1/2018 -0.00022244 -0.027252497 1.57 -1.57 -1.60
    4/1/2018 0.129966368 0.002715086 1.70 -1.57 -1.70
    5/1/2018 -0.06308127 0.021378191 1.76 -1.82 -1.74
    6/1/2018 -0.025067115 0.004830749 1.86 -1.89 -1.86
    7/1/2018 -0.080131612 0.035387951 1.90 -1.98 -1.86
    8/1/2018 0.031842536 0.029814315 1.96 -1.93 -1.93
    9/1/2018 -0.100472256 0.004285093 2.03 -2.13 -2.03
    10/1/2018 -0.143767471 -0.071929346 2.13 -2.27 -2.20
    11/1/2018 -0.095281689 0.017701752 2.25 -2.35 -2.23
    12/1/2018 -0.098711084 -0.047137951 2.25 -2.35 -2.30
    12/7/2018 0 0 2.25 -2.25 -2.25

d

Summary Introduction

We have to plot excess Alcoa return over excess S&P return.

d

Expert Solution
Check Mark

Explanation of Solution

We can use excel insert function to plot XY chart by selecting the data give above.

The plot will look like this.

Loose-Leaf Essentials of Investments, Chapter 7, Problem 1WM

Then we can also insert the trend line.

e

Summary Introduction

We have to find out the beta and alpha of Alcoa by looking at the trend line.

e

Expert Solution
Check Mark

Explanation of Solution

By looking at the trend line:

    Trend line is: y = 0.0012 x + 51.382
    Beta of Alcoa from the trend line = 0.0012
    And Alpha of Alcoa is : 51.382

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Previous
Chapter 7, Problem 14CP
Next
Chapter 7, Problem 2WM
Students have asked these similar questions
Suppose a corporation has two divisions with the different levels of risk. The Blank______ division would tend to have Blank______ returns. Multiple choice question. riskier; higher riskier; lower safer; higher
a. Refer to the table below and locate the E-Mini contract on the Standard & Poor's 500 Index. If the margin requirement is 10% of the futures price times the multiplier of $50, how much must you deposit with your broker to buy one March contract? Note: Round your answer to 2 decimal places. Index Futures Contract Open High Low Settle Change Open Interest Mini DJ Industrial Average (CBT)-$5 x index December 30,711 38,818 30,254 30,860 March 23 30,905 31,821 30,485 30,680 -116 -115 68,458 767 Mini S&P see (CME)-$se x index December 3759.75 SZOLLE 3676.75 3707.25 -25.50 March 23x 3791.25 3804-25 3707.75 3738.00 -25.50 2,288,063 43,134 Mini S&P Midcap 400 (CME)-$100 x index December 2356.80 2368.40 2282.70 2306.40 -41-20 54.941 March 23x 2306.90 -41-20 Mini Nasdaq 100 (CME)-$20 x index December 11328.25 11382.75 1049.00 11153.25 -45-50 269.975 March 23x 11437.00 11493.25 11167.00 11268.50 43.75 Mini Russell 2000 (CEM)-$50 x index December 1771.90 1779.70 1712.70 1732.30 -29.60 March 23x…
Ryan Corporation expects to pay a dividend of $5 per share on its common stock at the end of thecurrent year. This dividend will then grow at 15% for the next 3 years, and after that the dividendswill continue to grow at a constant growth rate of 4% per year forever. If the company’s cost ofcommon stock is 14%, what is the price of Ryan’s stock today?Page 2 of 2

Chapter 7 Solutions

Loose-Leaf Essentials of Investments

Ch. 7 - Prob. 1PSCh. 7 - Consider the statement: “If we can identify a...Ch. 7 - Are the following true or false? Explain. (LO 7-5)...Ch. 7 - Here are data on two companies. The T-bill rate is...Ch. 7 - Characterize each company in the previous problem...Ch. 7 - What is the expected rate of return for a stock...Ch. 7 - Kaskin, Inc., stock has a beta of 1.2 and Quinn,...Ch. 7 - Prob. 8PSCh. 7 - What must be the beta of a portfolio with E(rf)) =...Ch. 7 - The market price of a security is $40. Its...
Ch. 7 - You arc a consultant to a large manufacturing...Ch. 7 - Consider the following table, which gives a...Ch. 7 - Prob. 13PSCh. 7 - Prob. 14PSCh. 7 - If the simple CAPM is valid, which of the...Ch. 7 - Prob. 16PSCh. 7 - If the simple CAPM is valid, which of the...Ch. 7 - Prob. 18PSCh. 7 - Prob. 19PSCh. 7 - Prob. 20PSCh. 7 - In problem 2123 below, assume the risk-free rate...Ch. 7 - Prob. 22PSCh. 7 - In problem 2123 below, assume the risk-free rate...Ch. 7 - Two investment advisers are comparing performance....Ch. 7 - Suppose the yield on short-term government...Ch. 7 - Based on current dividend yields and expected...Ch. 7 - Consider the following data for a single index...Ch. 7 - Assume both portfolios A and B are well...Ch. 7 - Prob. 29PSCh. 7 - Prob. 30PSCh. 7 - Et Ch. 7 - Suppose two factors are identified for the U.S....Ch. 7 - Suppose there are two independent economic...Ch. 7 - As a finance intern at Pork Products, Jennifer...Ch. 7 - Suppose the market can be described by the...Ch. 7 - Which of the following statements about the...Ch. 7 - Kay, a portfolio n1anacr at Collins Asset...Ch. 7 - Prob. 3CPCh. 7 - Jeffrey Bruner, CFA, uses the capital asset...Ch. 7 - Prob. 5CPCh. 7 - According to CAPM, the expected rate of a return...Ch. 7 - Prob. 7CPCh. 7 - Prob. 8CPCh. 7 - 9. Briefly explain whether investors should expect...Ch. 7 - Assume that both X and Y are well-diversified port...Ch. 7 - Prob. 11CPCh. 7 - 12. A zero-investment, well-diversified portfolio...Ch. 7 - 13. An investor takes as large a position as...Ch. 7 - In contrast to the capital asset pricing model,...Ch. 7 - Prob. 1WMCh. 7 - Prob. 2WMCh. 7 - Prob. 3WMCh. 7 - a. Which of the stocks would you classify as...
Knowledge Booster
Background pattern image
Finance
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Text book image
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:9781260013962
Author:BREALEY
Publisher:RENT MCG
Text book image
Financial Management: Theory & Practice
Finance
ISBN:9781337909730
Author:Brigham
Publisher:Cengage
Text book image
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Text book image
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Text book image
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
SEE MORE TEXTBOOKS
The Exchange Rate and the Foreign Exchange Market [AP Macroeconomics Explained]; Author: Heimler's History;https://www.youtube.com/watch?v=JsKLBpy6cEc;License: Standard Youtube License