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To evaluate how sensitive beta estimates are to the period over which returns are measured, you now want to repeat the analysis in the last problem using weekly data over the past year.
a. For each firm, as well as for the S&P 500 index, download weekly price information for the past year using the menu options available in the Prices tab for each company.
b. For each firm, calculate the set of weekly returns that correspond to these daily price series.
c. Using weekly returns for the past year, calculate the beta for Walgreens and Exxon Mobil compared to the S&P 500 index.
d. How do your beta estimates for Walgreens and Exxon Mobil differ when using daily versus weekly data in the estimation process? Does your conclusion change about which stock is the riskiest?
Estimate the initial after-tax cash outlay for the proposed project and estimate the net present value associated with the proposed project - what will be the new price per share if the firm accepts this project, assuming the markets are efficient?
Discuss the different theories of interest structure and the advantages and disadvantages of each theory.
Find the value of a European call option with an exercise price of $50 and find the value of a European put option with an exercise price of $50, using the binomial approach
What is the Treynor portfolio performance measure? What is the Jensen portfolio performance measure, and how can it be adapted to include multifactor models of risk and expected return?
What is the market value of the portfolio at the end of Year 1? Immediately after the end of the year, interest rates decline to 10 percent. Estimate the new value of the portfolio, assuming you did the required rebalancing.
Impact of Beta on Portfolio: Obtain the closing price, the change in price from the previous day, and the beta
The U.S. Treasury bill is yielding 3.0% and the market has an expected return of 11.6%. What is the Treynor ratio of a correctly-valued portfolio that has a beta of 1.02, and a standard deviation of 12.2%?
Critique Franklin's belief that the European-style option will have a higher premium. Calculate, using put-call parity and the information provided, the European-style call option value.
Describe set of transactions that Bonita would have to undertake to take advantage of an actual futures contract price that was substantially higher or substantially lower than the theoretical value you established in Part a.
The rate of return in each week for each stock and for the stock market index for the 27 weekly periods. Calculate the discrete rate of return as well as the continuously compounded rate of return. Calculate the arithmetic mean return and the geometr..
Using the same potential stock prices as in Part a, calculate the expiration date payoffs and profits (net of the initial purchase price) for the following positions: (1) buy one XYZ put option, and (2) short one XYZ put option.
1. is your nbspportfolio balanced?nbsp justify your answer.2. what changes would you make if any?a high portfolio beta
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