Problem 9-21 Risk, Return, and Their Relationship (LG9-3, LG9-4)Consider the following annual returns of Estee Lauder and Lowes Companies: Estee LauderLowes CompaniesYear 123.9%6.0%Year 224.016.6Year 318.14.7Year 450.444.0Year 517.314.0Compute each stocks average return, standard deviation, and coefficient of variation.Note: Round your answers to 2 decimal places.
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Problem 9-21 Risk, Return, and Their Relationship (LG9-3, LG9-4)Consider the following annual returns of Estee Lauder and Lowes Companies: Estee LauderLowes CompaniesYear 123.9%6.0%Year 224.016.6Year 318.14.7Year 450.444.0Year 517.314.0Compute each stocks average return, standard deviation, and coefficient of variation.Note: Round your answers to 2 decimal places.
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- Characteristic Line and Security Market Line You are given the following set of data: Historical Rates of Return Year NYSE Stock X 1 -26.5% -11.0% 2 37.2 25.0 3 23.8 13.5 4 -7.2 2.0 5 6.6 11.1 20.5 18.5 7 30.6 19.0 a. Use a spreadsheet (or a calculator with a linear regression function) to determine Stock X's beta coefficient. Do not round intermediate calculations. Round your answer to two decimal places. b. Determine the arithmetic average rates of return for Stock X and the NYSE over the period given. Calculate the standard deviations of returns for both Stock X and the NYSE. Do not round intermediate calculations. Round your answers to two decimal places. Stock X NYSE Average return, FAvg % % Standard deviation, ơ %Problems BETA COEFFICIENTS AND RATES OF RETURN You are given the following set of data: 8A-1 Historical Rates of Return (7) Year Stock Y(F,) NYSE (r.) 1 3.0% 4.0% 2 18.2 14.3 9.1 19.0 4 (6.0) (14.7) 5 (15.3) (26.5) 33.1 37.2 6.1 23.8 3.2 (7.2) 14.8 6.6 10 24.1 20.5 11 18.0 30.6 Mean 9.8% 9.8% 13.8 19.6 a. Construct a scatter diagram graph (on graph paper) showing the rela- tionship between returns on Stock Y and the market, as shown in Figure 8A.1; then draw a freehand approximation of the regression line. What is the approximate value of the beta coefficient? (If you have a calculator with statistical functions, use it to calculate beta.) b. Give a verbal interpretation of what the regression line and the beta coefficient show about Stock Y's volatility and relative riskiness as compared with other stocks. c. Suppose the scatter of points had been more spread out, but the regression line was exactly where your present graph shows it. How would this affect (1) the firm's risk if the…Consider the following annual returns of Molson Coors and International Paper: MolsonCoors International Paper Year 1 21.8 % 5.6 % Year 2 − 9.5 −18.6 Year 3 42.0 −0.4 Year 4 − 9.1 27.7 Year 5 17.3 −12.2 Compute each stock’s average return, standard deviation, and coefficient of variation.
- Problems BETA COEFFICIENTS AND RATES OF RETURN You are given the following set of data: 8A-1 Historical Rates of Return (r) Stock Y(F,) NYSE (F.) Year 1 3.0% 4.0% 18.2 14.3 9.1 19.0 (6.0) (14.7) (15.3) (26.5) 33.1 37.2 7 6.1 23.8 3.2 (7.2) 9. 14.8 6.6 10 24.1 20.5 11 18.0 30.6 Mean 9.8% 9.8% 13.8 19.6 d. Suppose the regression line had been downward sloping and the beta coefficient had been negative. What would this imply about (1) Stock Y's relative riskiness and (2) its probable risk premium? e. Construct an illustrative probability distribution graph of returns (see Figure 8.3) for portfolios consisting of (1) only Stock Y, (2) 1% each of 100 stocks with beta coefficients similar to that of Stock Y, and (3) all stocks (i.e., the distribution of returns on the market). Use as the expected rate of return the arithmetic mean as given previously for both Stock Y and the market, and assume that the distributions are normal. Are the expected returns "reasonable"; that is, is it reasonable…Question 7 Below is annual tock return data on ABC Corp and XYZ, Inc. Year ABC XYZ 2010 8% -3% 2011 20% 0% 2012 -8% 20% 2013 4% 8% v (a) What is the average return and standard deviation for each stock? (Round answers to 2 decimal places, e.g. 52.75.) ABC XYZ Average return Standard deviation (b) The parts of this question must be completed in order. This part will be available when you complete the part above.Covariance and Correlation The following table shows the expected returns from six different stocks in three different states of the economy: State of Economy Probability Return Stock A Return Stock B Return Stock C Return Stock D Return Stock E Return Stock F Growth 0.25 31% 3% 15% 21% 0% 18% Status Quo 0.50 21% 1% 3% 7% 4% 3% Recession 0.25 20% 4% -5% -6% 6% -4% Calculate the expected return for each stock. Calculate the standard deviation for each stock. Consider of a portfolio consisting of 50% in Stock A and 50% in Stock B. Calculate the covariance between Stocks A and B. Calculate the expected return of the portfolio. Calculate the standard deviation of the portfolio. Consider of a portfolio consisting of 50% in Stock C and 50% in Stock D. Calculate the covariance between Stocks C and D. Calculate the expected return of the portfolio. Calculate the standard deviation of the portfolio.…
- Covariance and Correlation The following table shows the expected returns from six different stocks in three different states of the economy: State of Economy Probability Return Stock A Return Stock B Return Stock C Return Stock D Return Stock E Return Stock F Growth 0.25 31% 3% 15% 21% 0% 18% Status Quo 0.50 21% 1% 3% 7% 4% 3% Recession 0.25 20% 4% -5% -6% 6% -4% Consider of a portfolio consisting of 50% in Stock E and 50% in Stock F. Calculate the covariance between Stocks E and F. Calculate the expected return of the portfolio. Calculate the standard deviation of the portfolio.What is Stock X's geometric returns if it has the following returns? Year 1 8% Year 2 - 5% Year 3 10% Year 4 - 6% Year 5 15% a. 4.1%. b. 5.2% c. 6.8% d. 8.5%Directions: Compute the total returns, the average of returns, and the standard deviation of the following stocks: 2) 1) EGRH Inc. DMP, Ltd. AVERAGE OF RETURNS (XI-X)² (x) YEAR AVERAGE OF RETS STOCK RETURN RICE YEA (x₁) Jan-2021 P8.30 Feb-2021 P8.60 Jan-2021 P0.088 Feb-2021 P0.090 Mar-2021 P0.097 Apr-2021 PO.189 May-2021 PO.164 Mar-2021 P9.14 Apr-2021 P13.30 May-2021 P13 Jun-2021 P0.495 Jun-2021 P 0 Jul-2021 PO.280 Jul-2021 6.94 Aug-2021 P0.455 Aug-202 P13.70 Sep-2021 P0.390 Sep-2 P14.88 Oct-2021 P0.375 0 21 P15.30 Nov-2021 PO.325 -2021 P14.30 Dec-2021 P0.330 Dec-2021 P15.52 SD (8) = 3) STOCK RETURN PRICE (x₁) GSM Inc. YEAR Jan-2021 P57.70 Feb-2021 P52.90 Mar-2021 P50.95 Apr-2021 P58.2 May-2021 P7 05 Jun-2021 34.75 Jul-2021 P85.00 Aug-20 P105.00 Sep-21 P114.00 O 2021 P101.00 N-2021 P100.40 Dec-2021 P113.80 SD (8) = STOCK RETURN CE (x₁) AVERAGE OF RETINS ²) (x₁-x)² SD (8) = ACEE, Inc. YEA Jan-2021 P156 Feb-2021 P20.80 Mar-2021 P22.50 Apr-2021 P18.90 May-2021 P17 Jun-2021 P76 Jul-2021…
- Year AT&T Stock Returns Market Index Returns 1 8 6 2 7 3 3 10 12 4 14 13 5 8 9 The equation of the characteristic line for AT&T is: Group of answer choices Return = 0.538 + 0.9200*Market Return Return = -3.089 + 1.2436*Market Return Return = 0.813 + 0.6530*Market Return Return = 0.471 + 0.0311*Market Return Return = 4.578 + 0.5607*Market ReturnConsider the following annual returns of Molson Coors and International Paper: MolsonCoors International Paper Year 1 16.8 % 4.6 % Year 2 − 8.5 −17.6 Year 3 37.0 −0.3 Year 4 − 7.1 26.7 Year 5 16.3 −11.2 Compute each stock’s average return, standard deviation, and coefficient of variation. (Round your answers to 2 decimal places.) Avergae Return Standard deviation Coefficient of variationWhich stock appears better?multiple choice International Paper Molson CoorsProblem 9-21 Risk, Return, and Their Relationship (LG9-3, LG9-4) Consider the following annual returns of Estee Lauder and Lowe's Companies: Lowe's Companies -7.0% 16.7 4.8 45.0 -15.0 Year 1 Year 2 Year 3 Year 4 Year 5 Estee Lauder 24.0% -25.0 18.2 50.5 -17.4 Compute each stock's average return, standard deviation, and coefficient of variation. Note: Round your answers to 2 decimal places. Average return Standard deviation Coefficient of variation Which stock appears better? Estee Lauder % % Lowe's Companies % %