Find the beta for amazon

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Reference no: EM133109571

The excel file 'Question 2_Stock Prices CW 2021' contains the monthly stock prices for Amazon (the technology company) as well as the value of the S&P 500 index over the period 30/05/1997 to 30/09/2019. Excel functions STDEV, VAR, COVAR, and CORREL are especially useful for answering the questions below.

a) Calculate the monthly returns for the S&P 500 index and for Amazon. Find the beta for Amazon. Interpret the value that you have found for Amazon's beta.

b) Forecast the expected return for Amazon using the CAPM model and assuming that the return on the market is 3.8% and the risk-free rate is 1.5%.

c) Suppose that you can borrow or lend at 1.5%, which is the risk-free rate. Would you invest in:

1. Some combination of your stock (Amazon) and the market (S&P 500)

2. Some combination of the market (S&P 500 index) and borrowing or lending at the risk-free rate? Please explain.

Reference no: EM133109571

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