Reference no: EM13496428
1.Go to Chapter Resources on MyFinanceLab and use the data in the spreadsheet provided to estimate the beta of Nike and Dell stock based on their monthly returns from 2004–2008. (Hint: You can use the slope() function in Excel.)
2.Using the same data as in Problem 1, estimate the alpha of Nike and Dell stock, expressed as % per month. (Hint: You can use the intercept() function in Excel.)
3.Using the same data as in Problem 1, estimate the 95% confidence interval for the alpha and beta of Nike and Dell stock using Excel’s regression tool (from the data analysis menu).
4.In mid-2009, Ralston Purina had AA-rated, 6-year bonds outstanding with a yield to maturity of 3.75%.
a. What is the highest expected return these bonds could have?
b. At the time, similar maturity Treasuries has a yield of 3%. Could these bonds actually have an expected return equal to your answer in part (a)?
c. If you believe Ralston Purina’s bonds have 1% chance of default per year, and that expected loss rate in the event of default is 40%, what is your estimate of the expected return for these bonds?
5.In mid-2009, Rite Aid had CCC-rated, 6-year bonds outstanding with a yield to maturity of 17.3%. At the time, similar maturity Treasuries had a yield of 3%. Suppose the market risk premium is 5% and you believe Rite Aid’s bonds have a beta of 0.31. If the expected loss rate of these bonds in the event of default is 60%, what annual probability of default would be consistent with the yield to maturity of these bonds?
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What is the highest expected return these bonds could have
: Go to Chapter Resources on MyFinanceLab and use the data in the spreadsheet provided to estimate the beta of Nike and Dell stock based on their monthly returns from 2004–2008. (Hint: You can use the slope() function in Excel.)
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