EVALUATING RISK AND RETURN Bartman Industries's and Reynolds Inc.'s stock prices and dividends, along with the Winslow 5000 Index, are shown here for the period 2012- 2017. The Winslow 5000 data are adjusted to include dividends. Year 2017 2016 2015 2014 2013 2012 Bartman Industries Stock Price $17.25 14.75 16.50 10.75 11.37 7.62 Reynolds Inc. Dividend Stock Price $1.15 1.06 1.00 0.95 0.90 0.85 $48.75 52.30 48.75 57.25 60.00 55.75 Dividend $3.00 2.90 2.75 2.50 2.25 2.00 Winslow 5000 Includes Dividends $11,663.98 8,785.70 8,679.98 6,434.03 5,602.28 4,705.97 a. Use the data to calculate annual rates of return for Bartman, Reynolds, and the Winslow 5000 Index. Then calculate each entity's average return over the 5-year peri- od. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to get the capital gain or loss, adding the dividend to the capital gain or loss, and dividing the result by the beginning price. Assume that dividends are already included in the index. Also, you cannot calculate the rate of return for 2012 because you do not have 2011 data.) b. Calculate the standard deviations of the returns for Bartman, Reynolds, and the Winslow 5000. (Hint: Use the sample standard deviation formula, Equation 8.2a in this chapter, which corresponds to the STDEV function in Excel.) c. Calculate the coefficients of variation for Bartman, Reynolds, and the Winslow 5000. d. Assume the risk-free rate during this time was 3%. Calculate the Sharpe ratios for Bartram, Reynolds, and the Index over this period using their average returns. e. Construct a scatter diagram that shows Bartman's and Reynolds's returns on the vertical axis and the Winslow 5000 Index's returns on the horizontal axis.
EVALUATING RISK AND RETURN Bartman Industries's and Reynolds Inc.'s stock prices and dividends, along with the Winslow 5000 Index, are shown here for the period 2012- 2017. The Winslow 5000 data are adjusted to include dividends. Year 2017 2016 2015 2014 2013 2012 Bartman Industries Stock Price $17.25 14.75 16.50 10.75 11.37 7.62 Reynolds Inc. Dividend Stock Price $1.15 1.06 1.00 0.95 0.90 0.85 $48.75 52.30 48.75 57.25 60.00 55.75 Dividend $3.00 2.90 2.75 2.50 2.25 2.00 Winslow 5000 Includes Dividends $11,663.98 8,785.70 8,679.98 6,434.03 5,602.28 4,705.97 a. Use the data to calculate annual rates of return for Bartman, Reynolds, and the Winslow 5000 Index. Then calculate each entity's average return over the 5-year peri- od. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to get the capital gain or loss, adding the dividend to the capital gain or loss, and dividing the result by the beginning price. Assume that dividends are already included in the index. Also, you cannot calculate the rate of return for 2012 because you do not have 2011 data.) b. Calculate the standard deviations of the returns for Bartman, Reynolds, and the Winslow 5000. (Hint: Use the sample standard deviation formula, Equation 8.2a in this chapter, which corresponds to the STDEV function in Excel.) c. Calculate the coefficients of variation for Bartman, Reynolds, and the Winslow 5000. d. Assume the risk-free rate during this time was 3%. Calculate the Sharpe ratios for Bartram, Reynolds, and the Index over this period using their average returns. e. Construct a scatter diagram that shows Bartman's and Reynolds's returns on the vertical axis and the Winslow 5000 Index's returns on the horizontal axis.
Fundamentals of Financial Management (MindTap Course List)
14th Edition
ISBN:9781285867977
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter8: Risk And Rates Of Return
Section: Chapter Questions
Problem 22SP
Related questions
Question
Transcribed Image Text:EVALUATING RISK AND RETURN Bartman Industries's and Reynolds Inc.'s stock prices
and dividends, along with the Winslow 5000 Index, are shown here for the period 2012-
2017. The Winslow 5000 data are adjusted to include dividends.
Year
2017
2016
2015
2014
2013
2012
Bartman Industries
Stock Price
$17.25
14.75
16.50
10.75
11.37
7.62
Reynolds Inc.
Dividend Stock Price
$1.15
1.06
1.00
0.95
0.90
0.85
$48.75
52.30
48.75
57.25
60.00
55.75
Dividend
$3.00
2.90
2.75
2.50
2.25
2.00
Winslow 5000
Includes Dividends
$11,663.98
8,785.70
8,679.98
6,434.03
5,602.28
4,705.97
a. Use the data to calculate annual rates of return for Bartman, Reynolds, and the
Winslow 5000 Index. Then calculate each entity's average return over the 5-year peri-
od. (Hint: Remember, returns are calculated by subtracting the beginning price from
the ending price to get the capital gain or loss, adding the dividend to the capital gain
or loss, and dividing the result by the beginning price. Assume that dividends are
already included in the index. Also, you cannot calculate the rate of return for 2012
because you do not have 2011 data.)
b. Calculate the standard deviations of the returns for Bartman, Reynolds, and the
Winslow 5000. (Hint: Use the sample standard deviation formula, Equation 8.2a in this
chapter, which corresponds to the STDEV function in Excel.)
c. Calculate the coefficients of variation for Bartman, Reynolds, and the Winslow 5000.
d. Assume the risk-free rate during this time was 3%. Calculate the Sharpe ratios for
Bartram, Reynolds, and the Index over this period using their average returns.
e. Construct a scatter diagram that shows Bartman's and Reynolds's returns on the
vertical axis and the Winslow 5000 Index's returns on the horizontal axis.
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