User Account

All Pages

Calculate the standard deviation of the returns for goodman

Assignment Help Financial Management
Reference no: EM131349276

a. Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, and then calculate average returns over the five-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 2010 because you do not have 2009 data.)

b. Calculate the standard deviation of the returns for Goodman, Landry, and the Market Index. (Hint: Use the sample standard deviation formula given in the chapter, which corresponds to the STDEV function in Excel.)

c. Construct a scatter diagram graph that shows Goodman’s and Landry’ returns on the vertical axis and the Market Index’s returns on the horizontal axis.

d. Estimate Goodman’s and Landry’s betas as the slopes of regression lines with stock returns on the vertical axis (y-axis) and market return on the horizontal axis (x-axis). (Hint: use Excel’s SLOPE function.) Are these betas consistent with your graph?

e. The risk-free rate on long-term Treasury bonds is 6.04%. Assume that the market risk premium is 5%. What is the expected return on the market? Now use the SML equation to calculate the two companies' required returns.

f. If you formed a portfolio that consisted of 50% Goodman stock and 50% Landry stock, what would be its beta and its required return?

g. Suppose an investor wants to include Goodman 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% of Goodman, 15% of Stock A, 40% of Stock B, and 20% of Stock C.

Reference no: EM131349276

Questions Cloud

Identify the core values most relevant to their purchase : Identify the core values most relevant to their purchase and use. Determine whether these values encourage or discourage use or ownership
Manufacturing capacity available : How much will the objective function, 'Total Profit', change if there was one additiional hour of Manufacturing capacity available?
Cash for each level of desired dividend income level : Erik owns 2,000,000 shares of Wiseguy Entertainment. Wiseguy just declared a cash dividend of $0.05 per share. The stock is currently selling for $5.00. If Erik wants an annual "dividend income" of $50,000, $100,000, or $250,000 from his stockholding..
Question regarding the international management : Discuss the appropriateness of using the same leadership style across all EU countries. Include in your discussion the research results for different views given in your textbook.
Calculate the standard deviation of the returns for goodman : Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, and then calculate average returns over the five-year period. Calculate the standard deviation of the returns for Goodman, Landry, and the Market Index. Constru..
Discuss how irr and npv are related : FIN 370- Discuss how IRR and NPV are related and describe the situations in which the NPV and IRR metrics can provide conflicting signal. If there is a conflicting signal, which one would you place more emphasis on and why?
Calculate the expected shift in the absorption lines : Show that the polarizability of the lowest state in a quantum well tilted by an electric field, equation (7.38), can also be found by considering the change in wave functions and the resulting dipole moment -e(x).
Describe how important it is to understand operating cycle : FIN 370- Describe how important it is to understand the operating cycle and the sales forecasting process as it relates to the cash flow forecasting and management for every business.
What is the maximum price you would pay for share today : You are considering acquiring shares of stock that you would like to hold for one year. On a per-share basis, you expect to receive $1.95 in dividends and $25.3 from the sale of the share at the end of the year. If you want to earn an 11% rate of ret..

Reviews

Write a Review

Financial Management Questions & Answers

  Industry days sales outstanding

If the industry days sales outstanding is 65 days and a firm with sales of $1,034,550 has receivables of $268,700, how much in interest expense could the firm save if the receivables turn over as quickly as the industry average and the cost of carryi..

  Which bond will you buy and which bond will you short sell

Are you betting that rates are going to converge or diverge? Why? - Which bond will you buy and which bond will you short-sell?

  Investors face when investing in government securities

Many times students will discuss how U.S government bonds are backed by the full faith and creit of the U.S government. Generally government bonds have always been assumed to not have any risk. Therefore, even though these bonds have been thought to ..

  Bonds make annual payments and mature

You bought one of Great White Shark Repellant Co.’s 8 percent coupon bonds one year ago for $1,030. These bonds make annual payments and mature 14 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7..

  Use of discretionary sources of financing

Tulley Appliances Inc. projects next year's sales to be $21.25 million. Current sales are $17 million, based on current assets of $5.67 million and fixed assets of $8.50 million. Based on your projections, and assuming that the $200,000 expansion in ..

  Cost of equity down and maximize shareholder value

What is an example of a company that uses debt yet still is able to keep their cost of equity down and maximize shareholder value. Be thorough in your analysis and explanations? (Not APPLE).

  About the preceding retirement

You plan to retire in exactly 20 years. Your goal is to create a fund that will allow you to receive $20,000 at the end of each year for the 30 years between retirement and death (a psychic told you that you’d die exactly 30 years after you retire). ..

  Securities are similar to treasury bills in the way

Federal agency securities are similar to Treasury bills in the way that they are both risk-free. Similar to Treasury-bonds, TIPS and STRIP are also issued by the US Treasury.

  Assume the face value of the treasury bill

Suppose investors can earn a return of 2% per 6 months on a Treasury note with 6 months remaining until maturity. What price would you expect a 6-month maturity Treasury bill to sell for?

  Ratio analysis for government financial condition analysis

What general problems must be addressed in doing ratio analysis for government financial condition analysis? Do traditional solvency ratios adequately address financial condition analysis concerns? Provide your responses supported by text and other r..

  Possibility of gain or loss on operating exposure offset

The possibility of a gain or loss on operating exposure offset by an opposite loss or gain on transaction exposure may appear contradictory. Explain why, when the currency in which a foreign subsidiary operates falls in value, the parent firm may exp..

  Government bond with a yield

Two years ago, Mathew purchased a 10 year government bond with a yield of 4.75%. Today, the 23) interest rate on government bonds with 8 years to maturity is 3.5%. If Mathew sells his bond today, he most likely will

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd