Reference no: EM131375778
Start with the partial model in the file IFM9 Ch02 P14 Build a Model.xls from the ThomsonNOW Web site. Bartman Industries' and Reynolds Incorporated's stock prices and dividends, along with the Market Index, are shown below. Stock prices are reported for December 31 of each year, and dividends reflect those paid during the year. The market data are adjusted to include dividends.
|
BARTMAN INDUSTRIES |
REYNOLDS INCORPORATED |
Market Index |
Year |
Stock Price |
Dividend |
Stock Price |
Dividend |
Includes Divs. |
2006
|
$17.250
|
$1.15
|
$48.750
|
$3.00
|
11,663.98
|
2005
|
14.750
|
1.06
|
52.300
|
2.90
|
8,785.70
|
2004
|
16.500
|
1.00
|
48.750
|
2.75
|
8,679.98
|
2003
|
10.750
|
0.95
|
57.250
|
2.50
|
6,434.03
|
2002
|
11.375
|
0.90
|
60.000
|
2.25
|
5,602.28
|
2001
|
7.625
|
0.85
|
55.750
|
2.00
|
4,705.97
|
a. Use the data given to calculate annual returns for Bartman, Reynolds, and the Market Index, and then calculate average returns over the 5-year period. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to get the capital gain or loss, adding the dividend to the capital gain or loss, and dividing the result by the beginning price. Assume that dividends are already included in the index. Also, you cannot calculate the rate of return for 2001 because you do not have 2000 data.)
b. Calculate the standard deviations 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.)
c. Now calculate the coefficients of variation for Bartman, Reynolds, and the Market Index.
d. Construct a scatter diagram graph that shows Bartman's and Reynolds's returns on the vertical axis and the Market Index's returns on the horizontal axis.
e. Estimate Bartman's and Reynolds's betas by running regressions of their returns against the Index's returns. Are these betas consistent with your graph?
f. The risk-free rate on long-term Treasury bonds is 6.04 percent. Assume that the market risk premium is 5 percent. What is the expected return on the market? Now use the SML equation to calculate the two companies' required returns.
g. If you formed a portfolio that consisted of 50 percent of Bartman stock and 50 percent of Reynolds stock, what would be its beta and its required return?
h. Suppose an investor wants to include Bartman Industries' stock in his or her portfolio. Stocks A, B, and C are currently in the portfolio, and their betas are 0.769, 0.985, and 1.423, respectively. Calculate the new portfolio's required return if it consists of 25 percent of Bartman, 15 percent of Stock A, 40 percent of Stock B, and 20 percent of Stock C.
Implement an it strategic idea
: If I were tasked to eliminate risk to successfully implement an IT strategic idea I would hold meetings with all of the necessary parties involved in the process. Similar to how we have done in our SLP assignments
|
Authorizes the use of control orders for terrorists
: Legislation has been introduced in the united state that authorizes the use of control orders for terrorists you have been hired to conduct an impact assement of their use. What legal issues arise from their implementation? How effective would these ..
|
Incorporate ideas-concepts-theories
: Choose a topic you are interested in learning more about (must be related to Org. Comm.) Obviously, the topic needs to incorporate ideas/concepts/theories from the class (Organizational Communication) and text. But also requires analyzing the infl..
|
Three ways that evaporator temperature can be controlled
: Explain a method used on walk-in coolers and freezers to help prevent warm air from entering the case when the door is opened.
|
Calculate the standard deviations of the returns for bartman
: Calculate the standard deviations 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.)
|
Summarizing the different categories of air cargo systems
: Write and submit a two to three page report summarizing the different categories of air cargo systems (passenger, all cargo). Include information on the following:
|
How health care buyers make choices
: Recall a situation in which you sought health care of some type (not including care for an injury or illness). Determine if your situation followed the five steps of the buying decision model and what role marketing may have played in your seeking..
|
Statement about the outcomes of leadership actions
: Which is the least accurate statement about the outcomes of leadership actions?
|
Design of commercial refrigeration systems
: Food items like milk, cheese, and fresh fruit and vegetables are usually stored at what temperatures?
|