finance 494645

7/22/2012 2010 17.25 1.1499999999999999 48.75 3 11663.98 2009 15 1.06 52.3 2.9 8785.7000000000007 2008 16.5 1 48.75 2.75 8679.98 2007 10.75 0.95 57.25 2.5 6434.03 2006 11.375 0.9 60 2.25 5602.28 2005 7.625 0.85 55.75 2 4705.97 2010 2009 2008 2007 2006 2010 0 0 0 2009 0 0 0 2008 0 0 0 2007 0 0 0 2006 0 0 0 0.05 6.0400000000000002E-2 6.0400000000000002E-2 0.05 0.1104 0.25 0.76900000000000002 0.15 0.98499999999999999 0.4 1.2230000000000001 0.2 1 7/22/2012 Standard deviation of returns Risk-free rate = = Beta Market Risk Premium * Risk-free rate + Portfolio Weight Stock C Stock A Stock B Portfolio Beta = Year Stock Price Dividend Index Reynolds Incorporated Includes Divs. Data as given in the problem are shown below: Reynolds Bartman Industries Average Bartman Coefficient of Variation Bartman’s beta = Reynolds’ beta = Bartman: Reynolds: Required return The beta of a portfolio is simply a weighted average of the betas of the stocks in the portfolio, so this portfolio’s beta would be: Portfolio beta = * Beta Required return on portfolio: Expected return on market = Risk-free rate Market risk premium + Use the function wizard to calculate the standard deviations. Market Index We now calculate the rates of return for the two companies and the index: c. Now calculate the coefficients of variation Bartman, Reynolds, and the Market Index. Note: To get the average, you could get the column sum and divide by 5, but you could also use the function wizard, fx. Click fx, then statistical, then Average, and then use the mouse to select the proper range. Do this for Bartman and then copy the cell for the other items. b. Calculate the standard deviation of the returns for Bartman, Reynolds, and the Market Index. (Hint: Use the sample standard deviation formula given in the chapter, which corresponds to the STDEV function in Excel.) It is easiest to make scatter diagrams with a data set that has the X-axis…