Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
Textbook Question
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Chapter 9, Problem 1SQ

(VAR.P and STDEV.P) Choose two well-known stocks and download the latest 61 months of adjusted prices from finance.yahoo.com. Calculate the monthly returns for each stock. Now find the variance and standard deviation of the returns for each stock by using VAR.P and STDEV.P. Annualize the variance by multiplying by 12 and the standard deviation by multiplying by the square root of 12.

Expert Solution & Answer
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Summary Introduction

To determine: The variance and standard deviation of two stocks.

Answer to Problem 1SQ

Company AL’s variance is 0.0008497 and standard deviation is 2.91%. Company NX’s variance is 0.0014812 and standard deviation is 3.85%.

Explanation of Solution

Determine the variance and standard deviation of Company AL

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 9, Problem 1SQ , additional homework tip  1

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 9, Problem 1SQ , additional homework tip  2

Excel Workings:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 9, Problem 1SQ , additional homework tip  3

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 9, Problem 1SQ , additional homework tip  4

Therefore the Company AL’s variance is 0.0008497 and standard deviation is 2.91%. Company NX’s variance is 0.0014812 and standard deviation is 3.85%.

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