Concept explainers
(a)
To determine:
To set the spreadsheet for calculating the relative strength of the banking sector compared to the broad market.
Introduction:
Relative strength helps to measure the extent to which a security has underperformed or it has outperformed its own industry or the entire market. Relative strength is a ratio of price of security to industry price index.
Answer to Problem 26PS
The spreadsheet is obtained and given in explanation.
Explanation of Solution
Given Information:
The data given in the website. The initial value of the sector index and S&P 500 Index is equal to 100. Each week's
The data was downloaded from the given website.
| Week | SPY rate | FSRBX rate |
| 2013.01 | 1.64 | 1.75 |
| 2013.02 | 0.17 | 0.55 |
| 2013.03 | -0.82 | -0.92 |
| 2013.04 | 0.85 | 0.93 |
| 2013.05 | 0.59 | 0.92 |
| 2013.06 | -0.21 | -0.08 |
| 2013.07 | 0.12 | 1.37 |
| 2013.08 | 1.19 | 1.80 |
| 2013.09 | -3.27 | -2.73 |
| 2013.10 | -1.00 | -0.58 |
| 2013.11 | -0.03 | -0.87 |
| 2013.12 | 3.25 | 1.09 |
| 2013.13 | -0.23 | -0.21 |
| 2013.14 | -0.47 | -3.37 |
| 2013.15 | 0.47 | 0.00 |
| 2013.16 | -2.97 | -1.55 |
| 2013.17 | -0.91 | -1.75 |
| 2013.18 | 0.07 | 0.40 |
| 2013.19 | -0.20 | 1.11 |
| 2013.20 | 2.77 | 2.50 |
| 2013.21 | 0.11 | 0.04 |
| 2013.22 | 1.21 | 0.38 |
| 2013.23 | -0.27 | -0.89 |
| 2013.24 | 0.19 | 0.52 |
| 2013.25 | -0.85 | -0.17 |
| 2013.26 | -1.02 | -1.16 |
| 2013.27 | -0.92 | 0.04 |
| 2013.28 | -1.57 | 0.04 |
| 2013.29 | 1.72 | 0.95 |
| 2013.30 | -3.60 | -1.97 |
| 2013.31 | 0.32 | 0.83 |
| 2013.32 | 3.07 | 3.47 |
| 2013.33 | 0.88 | 1.05 |
| 2013.34 | 0.59 | 0.58 |
| 2013.35 | 0.85 | 0.54 |
| 2013.36 | 0.50 | 0.21 |
| 2013.37 | -1.49 | -1.72 |
| 2013.38 | 1.96 | 2.08 |
| 2013.39 | -1.00 | 0.16 |
| 2013.40 | -1.11 | -0.37 |
| 2013.41 | -1.13 | -1.51 |
| 2013.42 | 2.91 | 3.28 |
| 2013.43 | 3.61 | 2.73 |
| 2013.44 | 1.29 | 1.60 |
| 2013.45 | -0.86 | -2.16 |
| 2013.46 | 0.79 | 1.18 |
| 2013.47 | 0.76 | 0.19 |
| 2013.48 | 0.06 | -0.19 |
| 2013.49 | 0.57 | 0.04 |
| 2013.50 | 1.11 | 1.83 |
| 2013.51 | 0.08 | -0.15 |
| 2013.52 | -2.01 | -2.22 |
| 2014.01 | -0.17 | -1.56 |
| 2014.02 | -1.24 | 0.16 |
| 2014.03 | 0.56 | -0.28 |
| 2014.04 | 2.38 | 2.74 |
| 2014.05 | 0.45 | -0.39 |
| 2014.06 | -0.32 | -2.45 |
| 2014.07 | 0.87 | 0.36 |
| 2014.08 | 1.07 | 1.63 |
| 2014.09 | -1.91 | -1.87 |
| 2014.10 | -1.15 | -1.23 |
| 2014.11 | -1.18 | -2.58 |
| 2014.12 | 0.25 | 0.29 |
| 2014.13 | 0.48 | 0.66 |
| 2014.14 | -3.26 | -2.29 |
| 2014.15 | 1.24 | 0.75 |
| 2014.16 | 0.16 | 1.54 |
| 2014.17 | 1.15 | 0.78 |
| 2014.18 | -1.17 | -1.30 |
| 2014.19 | 2.93 | 3.13 |
| 2014.20 | 0.96 | -0.52 |
| 2014.21 | -0.09 | -0.36 |
| 2014.22 | 0.05 | -0.04 |
| 2014.23 | 1.37 | 1.65 |
| 2014.24 | -1.96 | -1.07 |
| 2014.25 | 0.46 | 0.80 |
| 2014.26 | 1.49 | 1.19 |
| 2014.27 | 1.26 | 1.65 |
| 2014.28 | 0.57 | 0.35 |
| 2014.29 | 0.16 | -0.92 |
| 2014.30 | -0.69 | -1.24 |
| 2014.31 | 0.14 | 0.04 |
| 2014.32 | -0.47 | 0.39 |
| 2014.33 | -1.39 | -1.92 |
| 2014.34 | 1.24 | 1.00 |
| 2014.35 | 1.91 | 0.63 |
| 2014.36 | -0.46 | 0.08 |
| 2014.37 | -1.67 | -2.36 |
| 2014.38 | 1.32 | -0.08 |
| 2014.39 | -2.79 | -1.73 |
| 2014.40 | -0.78 | 0.04 |
| 2014.41 | -0.45 | 1.02 |
| 2014.42 | 1.41 | 2.23 |
| 2014.43 | 1.93 | 1.03 |
| 2014.44 | 1.35 | 3.02 |
| 2014.45 | 1.10 | -0.19 |
| 2014.46 | 1.60 | 1.72 |
| 2014.47 | -0.22 | -0.68 |
| 2014.48 | -0.41 | -0.38 |
| 2014.49 | 0.55 | 0.72 |
| 2014.50 | 0.31 | 0.19 |
| 2014.51 | -1.77 | -1.73 |
| 2014.52 | 3.15 | 2.41 |
| 2015.01 | 0.19 | -0.52 |
| 2015.02 | -2.10 | -2.89 |
| 2015.03 | 2.04 | 2.59 |
| 2015.04 | -1.76 | -1.81 |
| 2015.05 | 0.29 | 0.81 |
| 2015.06 | 1.72 | 1.71 |
| 2015.07 | 0.47 | 1.35 |
| 2015.08 | -0.50 | -1.07 |
| 2015.09 | -0.13 | 0.07 |
| 2015.1 | 1.99 | 2.13 |
| 2015.11 | -0.32 | -0.51 |
| 2015.12 | -0.29 | -0.66 |
| 2015.13 | -0.23 | -0.04 |
| 2015.14 | -0.64 | -0.41 |
| 2015.15 | 1.90 | 1.37 |
| 2015.16 | 0.24 | 3.11 |
| 2015.17 | 0.80 | 0.57 |
| 2015.18 | -2.48 | -2.76 |
| 2015.19 | -1.66 | -1.49 |
| 2015.2 | 1.01 | 0.59 |
| 2015.21 | 0.48 | 1.06 |
| 2015.22 | -2.83 | -0.80 |
| 2015.23 | -0.12 | -1.72 |
| 2015.24 | -0.17 | -1.60 |
| 2015.25 | 2.29 | 2.08 |
| 2015.26 | -0.53 | -0.11 |
| 2015.27 | -2.44 | -1.30 |
| 2015.28 | 0.34 | 2.67 |
| 2015.29 | 3.25 | 2.31 |
| 2015.3 | 0.17 | 0.72 |
| 2015.31 | -0.93 | -1.99 |
| 2015.32 | 2.89 | 1.88 |
| 2015.33 | -0.67 | -1.14 |
| 2015.34 | 1.23 | 0.54 |
| 2015.35 | -0.86 | -0.54 |
| 2015.36 | 1.73 | 1.80 |
| 2015.37 | -0.38 | -0.25 |
| 2015.38 | 1.61 | 0.78 |
| 2015.39 | 1.08 | 0.67 |
| 2015.4 | 1.20 | 0.87 |
| 2015.41 | 0.15 | -1.21 |
| 2015.42 | 0.78 | 0.28 |
| 2015.43 | -1.00 | -1.01 |
| 2015.44 | 1.25 | 1.62 |
| 2015.45 | 1.58 | 0.28 |
| 2015.46 | -0.05 | -0.62 |
| 2015.47 | -0.09 | -0.49 |
| 2015.48 | 0.85 | 1.12 |
| 2015.49 | 0.65 | 2.04 |
| 2015.5 | -1.11 | 0.03 |
| 2015.51 | 0.62 | 0.34 |
| 2015.52 | -0.76 | -0.74 |
| 2016.01 | 1.92 | 0.34 |
| 2016.02 | -0.29 | -0.65 |
| 2016.03 | -0.48 | -0.27 |
| 2016.04 | 1.88 | 1.78 |
| 2016.05 | -0.60 | -0.20 |
| 2016.06 | 1.24 | 1.82 |
| 2016.07 | -0.29 | -0.50 |
| 2016.08 | -4.57 | -4.10 |
| 2016.09 | 1.52 | 0.35 |
| 2016.1 | -1.21 | -1.77 |
| 2016.11 | 3.51 | 3.45 |
| 2016.12 | -0.97 | -2.21 |
| 2016.13 | 1.58 | -0.31 |
| 2016.14 | 0.74 | -0.24 |
| 2016.15 | 2.27 | 3.50 |
| 2016.16 | 0.61 | -0.30 |
| 2016.17 | 0.93 | 0.95 |
| 2016.18 | -0.03 | 0.34 |
| 2016.19 | 1.16 | 0.60 |
| 2016.2 | -0.61 | -0.97 |
| 2016.21 | 1.57 | 0.84 |
| 2016.22 | -1.97 | -2.20 |
| 2016.23 | 1.78 | 1.47 |
| 2016.24 | -1.64 | -2.55 |
| 2016.25 | -0.08 | -0.41 |
| 2016.26 | 1.70 | 1.18 |
| 2016.27 | 1.22 | 0.24 |
| 2016.28 | -0.87 | -3.31 |
| 2016.29 | -5.46 | -5.40 |
| 2016.3 | -0.90 | -4.03 |
| 2016.31 | 0.63 | 5.80 |
| 2016.32 | 0.00 | 3.71 |
| 2016.33 | 2.51 | 0.07 |
| 2016.34 | -0.50 | -1.49 |
| 2016.35 | -1.03 | -2.52 |
| 2016.36 | 1.94 | 1.66 |
| 2016.37 | 2.55 | 2.50 |
| 2016.38 | 0.40 | -1.74 |
| 2016.39 | 2.14 | 4.61 |
| 2016.4 | 0.31 | -2.58 |
| 2016.41 | -4.26 | -7.57 |
| 2016.42 | 2.63 | 2.98 |
| 2016.43 | -1.57 | -6.13 |
| 2016.44 | -4.01 | -2.14 |
| 2016.45 | 0.45 | -1.90 |
| 2016.46 | -1.14 | -2.72 |
| 2016.47 | 3.15 | 5.34 |
| 2016.48 | 1.52 | -0.24 |
| 2016.49 | -2.48 | -6.53 |
| 2016.5 | 1.18 | 1.08 |
| 2016.51 | -0.56 | -1.15 |
| 2016.52 | -4.06 | -6.69 |
| 2017.01 | -0.82 | 0.56 |
| 2017.02 | -5.77 | -7.23 |
| 2017.03 | 0.75 | 10.91 |
| 2017.04 | 4.91 | 7.74 |
| 2017.05 | -4.67 | -6.93 |
| 2017.06 | 1.56 | -1.07 |
| 2017.07 | 0.35 | 0.45 |
| 2017.08 | -1.32 | -5.12 |
| 2017.09 | -3.08 | -6.53 |
| 2017.1 | -0.07 | 1.77 |
| 2017.11 | 2.41 | 11.69 |
| 2017.12 | -0.43 | -7.26 |
| 2017.13 | 4.09 | 3.60 |
| 2017.14 | -2.56 | -4.91 |
| 2017.15 | 3.82 | 4.78 |
| 2017.16 | 0.81 | 2.42 |
| 2017.17 | 1.37 | 1.95 |
| 2017.18 | -1.85 | -4.99 |
| 2017.19 | 2.70 | 1.13 |
| 2017.2 | -3.52 | -4.13 |
| 2017.21 | 1.96 | 0.15 |
| 2017.22 | -2.89 | -7.05 |
| 2017.23 | -0.11 | -4.31 |
| 2017.24 | -2.87 | -4.07 |
| 2017.25 | -3.08 | -4.19 |
| 2017.26 | -0.96 | -4.67 |
| 2017.27 | -1.95 | -6.75 |
| 2017.28 | 1.72 | 12.69 |
| 2017.29 | -0.40 | 1.30 |
| 2017.3 | 0.55 | 7.63 |
| 2017.31 | 2.54 | 1.03 |
| 2017.32 | 0.62 | -1.55 |
| 2017.33 | -0.40 | -3.05 |
| 2017.34 | -0.66 | 3.25 |
| 2017.35 | -3.40 | 3.86 |
| 2017.36 | 1.35 | 2.30 |
| 2017.37 | -0.99 | 10.94 |
| 2017.38 | -2.63 | -10.46 |
| 2017.39 | -8.70 | -5.66 |
| 2017.4 | -19.79 | -18.66 |
| 2017.41 | 5.33 | 9.99 |
| 2017.42 | -6.63 | -7.68 |
| 2017.43 | 11.25 | 13.61 |
| 2017.44 | -3.07 | -8.20 |
| 2017.45 | -7.71 | -6.40 |
| 2017.46 | -8.19 | -20.03 |
| 2017.47 | 13.29 | 25.04 |
| 2017.48 | -2.39 | -0.34 |
| 2017.49 | 1.20 | -6.79 |
| 2017.5 | -0.09 | 2.69 |
| 2017.51 | -1.17 | -2.55 |
| 2017.52 | 6.66 | -0.29 |
The graph of the relative strength for S&P 500 and FB is plotted as shown below.
Using the price movements and their changing speed, the relative strength of the fund against the S&P 500 can be measured.
(b)
To determine:
To determine the instances where the relative strength ratio exceeds by minimum 5% from its 5 weeks prior value and to determine the number of weeks immediately following the substantial increase the banking sector outperforms S&P500 and how many weeks banking sector underperforms S&P500.
Introduction:
Relative strength helps to measure the extent to which a security has underperformed or it has outperformed its own industry or the entire market. Relative strength is a ratio of price of security to industry price index.
Answer to Problem 26PS
As per the data, 16 times the relative strength increases more than 5%.
Explanation of Solution
Given Information:
The data is available in the given website.
Of the 255 total instances, there are 16 times when the relative strength increases by greater than 5% over the interval of 5 weeks.
Here, it is seen that 10 times the FSRBX underperformed the S&P 500 following the increase of more than 5%.
There are 6 times that FSRBX outperformed S&P 500 following the increase of more than 5%.
(c)
Requirement 3 To Determine:
To determine the instances where the relative strength ratio decreases by minimum 5% from its 5 weeks prior value and to determine the number of weeks immediately following the substantial decrease the banking sector outperforms S&P 500 and how many weeks banking sector underperforms S&P 500.
Introduction:
Relative strength helps to measure the extent to which a security has underperformed or it has outperformed its own industry or the entire market. Relative strength is a ratio of price of security to industry price index.
Answer to Problem 26PS
As per the data, 31 times the relative strength moves decrease by greater than 5%.
Explanation of Solution
Given Information:
The data is available in the given website.
Of the 255 total instances, there are 31 times when the relative strength decreases by greater than 5% over the interval of 5 weeks.
Here it is seen that 17 times the FSRBX underperformed S&P 500 following the decrease of more than 5%.
There are 14 times that FSRBX outperformed S&P 500 following the decrease of more than 5%.
(d)
Requirement 4 To Determine:
To determine how well the relative strength rule functions in identifying the selling or buying opportunities.
Introduction:
Relative strength helps to measure the extent to which a security has underperformed or it has outperformed its own industry or the entire market. Relative strength is a ratio of price of security to industry price index.
Answer to Problem 26PS
The data above gives the bullish sign and the bearish sign.
Explanation of Solution
Given Information:
The data is available in the given website.
We can see the relative strength depicted in second part of requirement as bullish sign. Here the FB fund is likely to underperform the S&P 500 index than to perform better than the index according to this signal.
We can see the relative strength depicted in third part of requirement as bearish sign. Here the FB fund did not give a better performance than the index but there is no statistical difference succeeding the considerable change in the relative strength. There is random successive performance.
Want to see more full solutions like this?
Chapter 9 Solutions
ESSENTIALS OF INVESTMENTS - CONNECT ACCE
- If submitted image is blurr then please comment i will write values. i will give unhelpful please.arrow_forwardWhat are capital markets, and what is the purpose of capital markets? What is the foundation of the study on capital markets coping methods and increasing self-understanding? What are the general problems of capital markets to be addressed, and what are the consequences arising from the capital market?arrow_forwardMeticulous Drill & Reamer (MD&R) specializes in drilling and boring precise holes in hard metals (e.g., steel alloys, tungsten carbide, and titanium). The company recently contracted to drill holes with 3-centimeter diameters in large carbon-steel alloy disks, and it will have to purchase a special drill to complete this job. MD&R has eliminated all but two of the drills it has been considering: Davis Drills' T2005 and Worth Industrial Tools' AZ100. These producers have each agreed to allow MD&R to use a T2005 and an AZ100 for one week to determine which drill it will purchase. During the one-week trial, MD&R uses each of these drills to drill 31 holes with a target diameter of 3 centimeters in one large carbon-steel alloy disk, then measures the diameter of each hole and records the results. MD&R's results are provided in the table that follows and are available in the DATAfile named MeticulousDrills, Hole Diameter T2005 AZ100 3.06 2.91 3.04 3.31 3.13 2.82 3.01 3.01 2.95 2.94 3.02…arrow_forward
- I mistakenly submitted blurr image please comment i will write values. please dont Solve with incorrect values otherwise unhelpful.arrow_forwardhello tutor:If submitted image is blurr then please comment i will write values. i will give unhelpful please.arrow_forwardLara Fredericks is interested in two mutually exclusive investments. Both investments cover the same time horizon of 5 years. The cost of the first investment is $9900, and Lara expects equal and consecutive year-end payments of $3400. The second investment promises equal and consecutive payments of $4100 with an initial outlay of $12500 required. The current required return on the first investment is 8.4 %, and the second carries a required return of 10.4 %.a. What is the net present value of the first investment?b. What is the net present value of the second investment?c. Being mutually exclusive, which investment should Lara choose? d. Which investment is relatively more risky? Explain.arrow_forward
- What are some of the characteristics of a firm with a long operating cycle?arrow_forwardAbout this Assignment For this Corporate Finance 301 assignment, you will submit a research paper that analyzes the types of organizational business structures. You will apply knowledge of business structure concepts as acquired in the course. The research paper should follow APA formatting style. Project Prompts The written research paper should be at least 1,000 to 1,200 words in length and should include four sections based on the business structures studied throughout the course. Define each business structure, compare the corporate finance strategies of the four business structures, discuss the advantages and disadvantages of each business structure, and how each varies in taxation. Research Paper Sections ⚫ Sole Proprietorship ⚫ Partnership • Corporation ⚫ Limited Liability Company (LLC)arrow_forwardPLEASE ANSWER THE COLUMN FULLY AND CORRECTLY PLEASE DO THE RIGHT CALCULATION DOUBLE CHECK AS WELL TO GIVE ME THE RIGHT ANSWER REQUIRED: Given the following information, what are the NZD/SGD currency against currency bid-ask quotations? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Bank Quotations American Terms European Terms Bid Ask Bid Ask New Zealand dollar 0.733 0.7340 1.3870 1.3884 Singapore dollar 0.6186 0.6191 1.6423 1.6436 answer Bid Ask New Zealand dollar ? ? Singapore dollar ? ?arrow_forward
- About this Assignment For the Corporate Finance 301 assignment, you will submit a research paper that analyzes and discusses organizational financial risks. You will apply knowledge acquired in the course and use the concepts of multiple financial risks as the basis of research and analysis. The research paper should follow APA formatting style. Audience: upper-level business students. Project Prompt Write a 1,000-1,200-word analysis discussing financial risk concepts and assess the impact of the different financial risks on an organization. For this assignment, you will structure your assignment using four research paper sections associated with corporate risk management, as studied in the course. Base your research paper on the financial statements analyzed in Corporate Finance 301 assignment 2 and apply the knowledge acquired in the analysis. Define each financial risk, discuss the risk associated components, and evaluate the financial risks and how they affect the corporation's…arrow_forwardBobby Nelson, made deposits of $880 at the end of each year for 6 years. Interest is 6% compounded annually. What is the value of Bobby’s annuity at the end of 6 years?arrow_forward1. Find the future value if $1,250 is invested in Simple interest account paying 6.5%: a. for 5 years b. for 20 years 2. Find the future amount $ 35,000 is invested for 30 years at 4.25% compounded: a. annually b. Quarterly c. monthly d. weekly 3. How much should be put into an account today that pays 7.75% compounded monthly if you need $10,000 in 5 years. 4. Find the effective rate for: a. 5.75% compounded quarterly b. 6.25% compounded daily. 5. $50 is invested at the end of each month into an account paying 7.5% compounded monthly. How much will be in the account after 5 years?…arrow_forward
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author: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 ProfessorPublisher:McGraw-Hill Education