Solving problems using excel

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2

>Module 0

5

alculate the investment’s expected return and its standard deviation

TA

0

10.0%

0

return

and

for periods 2 through 4.

Waters

Period

1

2

3

.00

4

Panner

Period
Price

1

2

3

4

SAR per share on April, 1 2021 and sold 12 shares for 28.35 SAR on August 1, 2022.

DATA

DATA

25.35

12

DATA

eta

A

B

C

and Security Market Line

Calculate the expected return on your portfolio. (The expected return of a portfolio equals the weighted average of the indivdiual stocks’ expected returns, where the weights are the percentage invested in each stock).

DATA

Expected

Stock

Beta
Return

1
10.0%
0.95

2

3

0.85

4
25.0%

5.0%

5

1.0%

common stock, which has a beta of 1.25.The risk -free rate is 2 percent, and the market portfolio has an expected return of 13 percent.

Solution:

DATA

2.0%

1.25

.

DATA

a.

ABC Corporation

S&P 500 Index

Returns
Prices

2,025

Problem 5-

1
Rate of return and standard deviation
Porter, Inc. is evaluating a security.

C
D

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A
Probability Return
0.10

10.0%
0.20 5.0%
0.

3
0.

4 25.0%
Expected
Variance
Standard deviation
Problem 5-2 Holding

Period Returns
From the price data tha follow, compute the holding period returns for

Waters Panner
DATA
Price
8.00
10.00
12
14.00
26.00
29.00
30.00
28.00
Problem 5-3: Holding-Period Gain SAR and Return
Suppose you purchased 20 shares of Apple stock for

25.35
Calculate the holding-period SAR gain for the shares you sold, assuming no dividends was distributed , and the holding-period rate of return.
Solution:
HOLDING PERIOD SARS GAIN AND RETURN
Purchase price
Selling price 28.32
Shares sold
Holding-period gain
Holding-period return
Problem 5-4
CAPITAL ASSET PRICING MODEL
Using the Capital Asset Pricing Model, estimate the appropriate required rate of return for the three stocks listed below, given that the risk-free rate is 5 percent and the expected return for the makret is 12 percent.
Stock B
0.85
0.95
1.65
Problem 5-5: Portfolio

Beta
Based on the data below:
a.
b. Calculate the portfolio beta.
Percentage
of Portfolio
1

1.0%
2

2.0% 1.25 7.0%
23.0% 12.0%
0.60
20.0% 1.60
Problem 5-6: Required Rate of Return CAPM
Compute an appropriate rate of return for

ABC Corporation
Risk-free rate =
Market expected return = 13.0%
Beta =
Rate of return =
Problem 5-7: Expected Return, Standard Deviation 
Below are the prices for ABC Corporation and the

S&P 500 Index
a. Calculate the monthyly holding-eriod returns for ABC and the S&P 500 Index.
b. What are the average monthly returns and stardard deviations for each?
Month
Prices
May-21 48.55 2,025
Jun-21 48.11 -0.91% 2,024
Jul-21 48.95 1.75% 2,026
Aug-21 50.55 3.27% 2,013
Sep-21 50.82 0.53% 2,014
Oct-21 52.55 3.40% 2,018
Nov-21 53.75 2.28% 2,023
Dec-21 54.05 0.56%
Jan-22 47.95 -11.29% 1,995
Feb-22 51.33 7.05% 2,095
Mar-22 51.58 0.49% 2,096
Apr-22 52.42 1.63% 2,088
May-22 53.77 2.58% 2,105

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