Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
In this exercise you will familiarize yourself with index models, beta and CAPM estimation. Download the spreadsheet data_question3.xlsx from Sakai and use the data contained therein to answer Question 3. Spreadsheet data_question3.xlsx contains monthly stock returns for AT&T, Ford, Google and Exxon Mobile. Additionally, it contains monthly returns on Treasury securities and a broad market index. Be careful to calculate monthly excess returns over Treasuries as this is what you will need for estimating single index models.
a) In class we have discussed how index models can be used to separate firm-specific risk and market risk inherent in a firm's expected returns. What is the analytical formula to separate a security's risk into market risk and firm specific risk? b) Using excess returns over Treasuries, estimate the beta coefficients for AT&T, Ford, Google and Exxon Mobile without running a regression model. Additionally, using your result from part (a) estimate the standard deviation for each firm's expected return and estimate each firm's market risk component and firm-specific risk component. (Again use excess returns over Treasuries) Use the Excel functions STDEV.S and COVARIANCE.S for this exercise. Tabulate your results in the write-up as follows:
c) Describe and interpret your results in the single-index model sense. i.e. how each stock moves with the overall market and which stock is the riskiest for a diversified investor? How does beta relate to the market risk component and how does it relate to the firm specific component? d) Suppose you want to construct a portfolio consisting of AT&T, Ford, Google and Exxon that exhibits minimal movement with the overall market, i.e. = 0. Using Microsoft Excel Solver calculate the weights such that is minimized under the constraint
β = 0. (Use excess returns over Treasuries for your calculations). Break up into market risk and firm-specific risk. Would you have eliminated all risk by only holding this portfolio of stocks?
Smith Corporation purchased an intangible asset for $110,000. Compute the second year's tax amortization. The second year would be a full year's amortization. The company estimates
Find a journal article online about just-in-time inventory systems. In the subject line of your post, include the title of the article that you read. Post a link to that article wi
For your assignment, discuss when the government and nonprofit organizations would use each of the following funds: Capital projects fund Debt service fund Special r
Radovilsky's Department Store in Haywood, California, maintains a successful catalog sales department in which a clerk takes orders by telephone. If the clerk is occupied on one li
JK is a motor dealership which organizes its financial statements to 30 November. In the year to 30 November 2009, transactions integrated the following: (a) JK had motor vehicl
Using some variation of business process mapping, graph out the mango concentrate supply chain focusing on when cost is added to the supply chain. (i.e. Display/draw the process
The following are three independent situations where the reporting entity for which financial statements are being prepared are underlined. Every company has a December 31, 2012 ye
(i) Describe the difference between the balance sheet and the income statement in financial statements of companies. (ii) Give two examples of intangible assets and two exampl
what are the purposes of cost accounting
A. Bolero Industries Ltd. has been approached by a customer who would like a special job to be done for her, and is willing to pay $60,000 for it. The job would require the followi
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd