Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Corporate Finance Expert

Data Case:

Today is April 30, 2012, and you have just started your new job with a financial planning firm. In addition to studying for all your license exams, you have been asked to review a portion of a client’s stock portfolio to find out the risk/return profiles of 12 stocks in the portfolio. Unfortunately, your small firm could not afford the expensive databases that will provide all this information with a few simple keystrokes, but that’s why they hired you. Specially, you have been asked to find the monthly average returns and standard deviations for the 12 stocks for the past five years. The stocks (with their symbols in parentheses) are:

Archer Daniels Midland (ADM)            International Business Machines Corporation (IBM)
Boeing (BA)                                   JP Morgan Chase & Co. (JPM)
Caterpillar (CAT)                             Microsoft (MSFT)
Deere & Co. (DE)                            Procter and Gamble (PG)
Google Inc. (GOOG)                        Hershey (HSY)
Wal-Mart (WMT)

1. Collect price information for each stock from Yahoo! Finance (finance.yahoo.com).

2. Convert these prices to monthly returns as the percentage change in the monthly prices (Hint: Create a separate worksheet within the Excel file.) Note that to compute a return for each month, you need a beginning and an ending price, so you will not be able to compute the return for the first month.

3. find out the mean monthly returns and standard deviations for the monthly returns of each of the stocks. Convert the monthly statistics to annual statistics for easier interpretation (multiply the mean monthly return by 12, and multiply the monthly standard deviation by √12).

4. Add the column in your Excel worksheet with average return across stocks for each monthly. This is the monthly return to an equally weighted portfolio of these 12 stocks. find out the mean and standard deviation of monthly returns for the equally weighted portfolio. Double check that the average return on this equally weighted portfolio is equal to the average return of all of the individual stocks. Convert these monthly statistics to annual statistics (as described in Step 3) for interpretation.

5. Using annual statistics, create an Excel plot with standard deviation (volatility) on the x-axis and average return on the y-axis as follows:

a. Create three columns on your spreadsheet with the statistics you created in problem 3 and 4 for each of the individual stocks and the equally weighted portfolio. First column would have the ticket, the second would have annual standard deviation, and the third will have annual mean return.

b. Highlight the data in last two columns (standard deviation and mean), select Insert>Chart>XY Scatter Plot. Complete chart wizard to finish the plot.

6. What do you notice about average of the volatilities of the individual stocks, compared to the volatility of the equally weighted portfolio?

Corporate Finance, Finance

  • Category:- Corporate Finance
  • Reference No.:- M91704

Have any Question? 


Related Questions in Corporate Finance

A british firm will receive 1 million from a us customer in

A British firm will receive $1 million from a U.S. customer in three months. The firm is considering two strategies to eliminate its foreign exchange exposure. The first strategy is to pledge the $1 million as collateral ...

1 describe the loan risk ratings within which subprime

1. Describe the loan risk ratings within which subprime loans fall. 2. Explain the three categories of Internet mortgage originators and how they differ in approach. 3. Describe the kinds of people who may want to arrang ...

1 make a list of five general topic areas that interest you

1. Make a list of five general topic areas that interest you. For each, identify the source of ideas you used to come up with that topic. 2. List five behaviors that you could observe in your day-to-day life. For each on ...

1 in addition to inventorying your walletpurse and removing

1. In addition to inventorying your wallet/purse and removing items, what other steps can you take in your life to reduce your exposure to identity theft? 2. Should the Sampsons accept the increase in the limit on their ...

Assignment time value of moneyinstructionsdemonstrate your

Assignment: Time Value of Money Instructions Demonstrate your understanding of financial concepts by completing the following problems. Where appropriate, show or explain your work. You may use Excel to work the problems ...

Create an online reacutesumeacute-transform your

Create an online résumé:- Transform your résumé to an online version. Upload files, for example, relevant reports and presentations you have completed. Include links to companies and organizations with which you have bee ...

Use the following firms to complete this problem

Use the following firms to complete this problem: Anheuser-Busch Companies, Inc. (BUD) Coca-Cola Company (KO) Molson Coors Brewing Company (TAP) PepsiCo, Inc. (PEP) Go to http://fi nance.yahoo.com, and input the ticker s ...

Proofread part of a report-assume that the following

Proofread part of a report:- Assume that the following passage is part of an informational report that you have prepared. Proofread it carefully for spelling errors, misused words, and grammar errors. Rewrite the passage ...

Contingencies respond to the followingbull review financial

"Contingencies" respond to the following: • Review financial data on Coca-Cola notes to financial statements, located athttp://assets.coca-colacompany.com/9b/d3/b75cdce348fa907295f549d2cc7e/2009_12_Coca-Cola_Item8.pdf • ...

Practice using voip-if you dont have much experience using

Practice using VoIP:- If you don't have much experience using VoIP, such as Skype or Google Voice, try calling another student or a coworker. Both services are free, have simple sign-up procedures, and include optional v ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen