Reference no: EM133061787
Please show excel formula for solution:
1. Using the data in the table below, calculate the return for investing in Citigroup stock (C) from January 2, 2008, to January 2, 2009, and also from January 3, 2012, to January 2, 2013, assuming all dividends are reinvested in the stock immediately.
|
Date
|
Price
|
Dividend
|
Date
|
Price
|
Dividend
|
|
1/2/2008
|
28.17
|
|
1/3/2012
|
30.72
|
|
|
1/31/2008
|
23.71
|
3.20
|
2/2/2012
|
33.32
|
0.01
|
|
5/1/2008
|
21.89
|
3.20
|
5/3/2012
|
26.51
|
0.01
|
|
7/31/2008
|
18.99
|
3.20
|
8/2/2012
|
29.71
|
0.01
|
|
10/30/2008
|
8.29
|
1.60
|
11/8/2011
|
66.65
|
0.01
|
|
1/2/2009
|
3.55
|
|
1/2/2013
|
42.83
|
|
2. Stock A has a beta of 1.2, Stock B has a beta of 0.6, the expected rate of return on an average stock is 14%, and the risk free rate of return is 7%. By how much does the required return on the riskier stock exceed the required return on the less risky stock?
3. Stocks A and B have the following returns:
Period Stock A Stock B
1 0.12 0.06
2 0.08 0.02
3 0.15 0.04
4 -0.05 0.01
5 0.08 -0.02
a. What are the expected returns of the two stocks? (Assume each period is equally weighted)
b. If their correlation is 0.4685, what is the expected return of a portfolio of 70% stock A & 30% stock B?
c. Calculate the standard deviation of each stock, using Excel.
d. Calculate the covariance between the two stocks, using Excel and using equation 11.6 (Hints: watch the videos Correlation and Using Excel to Calculate Return, Covariance, Correlation and Standard Deviation of Individual Stocks and of a Portfolio.)
4. You buy a stock for $40 and sell it for $80 eight years from now. The stock does not pay dividends. Calculate the compounded annual return on this stock.
5. You buy a security that pays $30/quarter for 4 years. The cost of the security is $400. What is your return?
6. You hold a diversified portfolio of $7,500 in each of 20 different stocks. The portfolio beta is 1.12. You decide to sell one stock with a beta of 1 for $7,500 and purchase another stock with a beta of 1.75. What is your portfolio's new beta?
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: 1. Using the data in the table below, calculate the return for investing in Citigroup stock (C) from January 2, 2008, to January 2, 2009, and also from January
|
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