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It contains the (actual) monthly returns on EXXON and American Express over the past 5 years (2010-2014). It also has the corresponding returns on the S&P500 and the monthly risk-free rates. (Assume throughout that the S&P500 is the appropriate market index.) Also, note that the risk-free rate is listed in the month for which it is relevant. In other words, in the row Jan-10 are the returns for January 2010 and the risk-free rate that was known at the beginning of that month. a. Estimate the betas of EXXON and American Express using the 5 years of monthly data (60 observations). (The easiest way is to use the =SLOPE function. This function returns the slope coefficient from a linear regression. Alternatively you can use the regression 3 package in the data analysis tool kit. Under the "Data" tab see Data Analysis/Regression.) Why are the numbers (slightly) different from those reported in Lecture 9? b. Calculate the monthly returns of a portfolio constructed to have a beta = 1.0 from the returns on EXXON and American Express. Calculate the beta and alpha of this portfolio. To what extent does this represent a profit opportunity? (The easiest way is to use the =SLOPE and =INTERCEPT function. The INTERCEPT function returns the constant coefficient, i.e., intercept, from a linear regression. If you used the regression package, it returns the slope, intercept, and many other outputs.)c. Based on the 5 years of data, what percentage of the (monthly) variance of EXXOM, American Express and the beta=1 portfolio is systematic? What percentage is idiosyncratic? (If you use the regression package, the output, specifically the R-squared of the regression, might be useful for answering this question. Otherwise you will need to calculate these quantities directly.) d. Assuming the CAPM holds, using the beta estimates from above, and assuming an annual risk-free rate of 2% (rf = 2%), and an annual market risk premium of 8% (E[rM]- rf = 8%), what are the annual expected/required returns on EXXON and American Express?
xyz common currently sells for 3share. you believe that one-month hence the stock could be worth 8 or could be
Reconsider the "double marginalization" model. Show how the upstream firm can use a two part tariff when selling inputs to the downstream firm to achieve the same level of profits as under vertical integration.
How might you know that you are at a point of diminishing returns, or where more study will not benefit you like it did before?
What do you understand by the term ‘Keynesianism’? From a policy perspective, outline key Keynesian policies comparing and contrasting these against a neo-liberal policy platform.
Focus on organizational change management
a researcher estimated that the price elasticity of demand for automobiles in the united states is - 1.2 while the
Find the equilibrium price and quantity for this market and Draw the budget constraint between "leisure hours" on the horizontal axis and "wage income" on the vertical.
In the economic theory of the company, we generally discuss only 2-factors, labor and capital, and in short run labor is variable factor and capital is the fixed factor of production.
It can produce 100 cars with 200 workers and 50 machines, or it can produce 166 cars with 300 workers and 75 machines. Would you describe the manufacturer production function as exhibiting decreasing, constant, or increasing returns to scale? Explain..
The dynamic laws of demand and supply tell us that: Excess demand leads to a tendency of prices to fall or decrease.
draw the budget line and the relevant indifference curve for a consumer who is initially a borrower. indicate the
You are considering two kinds of equipment for your company, alternative A with initial cost of $700,000, salvage value of $175,000 and annual cost of $40,000. Alternative B has an initial cost of $500,000, salvage value of $125,000 and annual cost o..
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