QUESTION 2 The following table contains yearly rate of returns on Pepsi and Sprite from 2020 to 2023: Year Rate of return on Pepsi (%) Rate of return on Sprite (%) 2020 10 10 2021 12 10 2022 2023 14 16 9 7 1. Compute RRC for each stock; 2. Would you invest in Pepsi or Sprite? Why or why not; 3. Compute the covariance between the return on Pepsi and the return on Sprite; 3. In order to mitigate risk (given your result in 1.3), would you consider investing in a portfolio consisting of Pepsi and Sprite? Why or why not?

QUESTION 2 The following table contains yearly rate of returns on Pepsi and Sprite from 2020 to 2023: Year Rate of return on Pepsi (%) Rate of return on Sprite (%) 2020 10 10 2021 12 10 2022 2023 14 16 9 7 1. Compute RRC for each stock; 2. Would you invest in Pepsi or Sprite? Why or why not; 3. Compute the covariance between the return on Pepsi and the return on Sprite; 3. In order to mitigate risk (given your result in 1.3), would you consider investing in a portfolio consisting of Pepsi and Sprite? Why or why not?

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter14: Valuation: Market-based Approach

Section: Chapter Questions

Problem 1BIC

See similar textbooks

Similar questions

(Computing rates of return) From the following price data, compute the annual rates of return for Asman and Salinas. Time Asman Salinas 1 $10 $30 2 12 27 3 11 32 4 13 34 (Click on the icon in order to copy its contents into a spreadsheet.) How would you interpret the meaning of the annual rates of return? Question content area bottom Part 1 The rate of return you would have earned on Asman stock from time 1 to time 2 is enter your response here%. (Round to two decimal places.)
From the following price data, compute the annual rates of return for Asman and Salinas. Time Asman Salinas 1 $ 10 $ 31 2 13 27 3 12 33 4 14 35 (Click on the icon in order to copy its contents into a spreadsheet.) How would you interpret the meaning of the annual rates of return? Question content area bottom Part 1 The rate of return you would have earned on Asman stock from time 1 to time 2 is enter your response here %. (Round to two decimal places.) Part 2 The rate of return you would have earned on Asman stock from time 2 to time 3 is enter your response here %. (Round to two decimal places.) Part 3 The rate of return you would have earned on Asman stock from time 3 to time 4 is enter your response here %. (Round to two decimal places.) Part 4 The rate of return you would have earned on Salinas stock from time 1 to time 2 is enter your response here %. (Round to two decimal places.) Part 5…
(Computing rates of return) From the following price data, compute the annual rates of return for Asman and Salinas. Time 1 2 3 12 4 14 (Click on the icon in order to copy its contents into a spreadsheet.) How would you interpret the meaning of the annual rates of return? Asman $9 11 Salinas $30 27 32 36 The rate of return you would have earned on Asman stock from time 1 to time 2 is %. (Round to two decimal places.)
QUESTION 9 Use the data in the table shown below. What is the geometric average return over the span of three years? Date 12/31/2018 12/31/2019 12/31/2020 12/31/2021 O a. 28.7% O b.7.5% c.9.5% O d. 8.9% Price $43.00 $45.60 $42.60 $52.50 Dividend $0.80 $0.80 $0.90
Your rate of return expectations for the stock of Kayleigh Cosmetics Company during the next year are: KAYLEIGH COSMETICS CO. Possible Rate of Return Probability −0.60 ............0.15 −0.30 ............0.10 −0.10 ............0.05 0.20 ............0.40 0.40 ............0.20 0.80 ............0.10 a. Compute the expected return [E(Ri)] on this stock, the variance (σ2) of this return, and its standard deviation (σ).
Use the data for Starbucks (SBUX) and Google (GOOGL) in the table, to answer the following questions: a. What is the return for SBUX over the period without including its dividends? With the dividends? b. What is the return for GOOGL over the period? c. If you have 50% of your portfolio in SBUX and 50% in GOOGL, what was the return on your portfolio excluding dividends? ex Data table (Click on the following icon in order to copy its contents into a spreadsheet.) SBUX Dividend GOOGL $57.24 $0.00 $1,048.47 $54.46 $0.30 $1,055.41 $57.04 $0.30 $51.55 $0.36 $67.04 $0.36 Date 16-Nov-2017 07-Feb-2018 09-May-2018 08-Aug-2018 14-Nov-2018 Print $1,088.95 $1,261.33 $1,054.58 Done Dividend $0.00 $0.00 $0.00 $0.00 $0.00 - X Clea
The following table is an analyst's best guess for the likelihood of various states of the economy next year and the corresponding return on the stock of EFG Corp. State of the Expected Return Economy Probability (%) Ideal 0.2 20.0 Good 0.4 15.0 Fair 0.3 8.0 Poor 0.1 -10.0 What is the expected percentage rate of return on EFG Corp. stock? Group of answer choices 3.4 10.4 10.8 11.4 not enough information
QUESTION 2 The following table contains data on the returns of stock A and stock B from 2021 to 2024: Year 2021 2022 2023 2024 Return on stock A 6 8 10 12 Return on stock B 13 10 14 11 1. Compute the mean return on stock A and the mean return on stock B; 2. Compute the variance of the return on stock A and the variance of the return on stock B; 8. Compute the standard deviation of the return on stock A and the standard deviation of the return on stock B; 4. Compute the coefficient of variation of the return on stock A and stock B; 5. Compute RRC for stock A and stock B (Hint: RRC = Mean Return/Standard Deviation); 6. Would you invest in Stock A or Stock B? Why?
10.4 Obtain at least 5 years’ worth of daily or weekly stock price data for a stock of your choice. a. Compute annual volatility using all the data. b.Compute annual volatility for each calendar year in your data. How does volatility vary over time? c.Compute annual volatility for the first and second half of each year in your data. How much variation is there in your estimate? how do I do these in excel?
Q3) Consider the following two companies and their forecasted returns for the upcoming year: (picture) A. What is the standard deviation of the returns on each company's stock (Company A, and B) (write all formulas). B. Of these two stocks, which is riskier? Justify your answer
PLEASE SOLVE THIS QUESTION, ASAP: Q: Suppose a company estimates following one year returns from investing in the common stock of Leopard Corporation: Possibility of Occurrence .1 .25 .1 .15 .1 .2 .1 Possible returns 15% 30% 15% -10% -5% 20% 10% Required: Calculate Expected return & Risk {Standard Deviation)
Presented here are summarized data from the balance sheets and income statements of Wiper Inc.: WIPER INC. Condensed Balance Sheets December 31, 2020, 2019, 2018 (in millions) 2020 $ 793 2,428 2019 $1,021 1,935 $2,956 2018 $ 883 1,734 $2,617 Current assets Other assets Total assets $3,221 Current liabilities Long-term liabilities Stockholders' equity $ 592 1,607 1,022 $3,221 $ 845 1,070 1,041 $2,956 $ 742 942 933 Total liabilities and stockholders' equity $2,617 WIPER INC. Selected Income Statement and Other Data For the year Ended December 31, 2020 and 2819 (in millions) 2020 2019 Income statement data: Sales $3,965 311 99 236 $2,928 325 Operating income Interest expense Net income Other data: Average number of common shares outstanding Total dividends paid 231 48.2 S 53.8 Required: a. Calculate return on investment, based on net income and average total assets, for 2020 and 2019. b. Calculate return on ecuity for 2020 and 2019. c. Calculate working capital and the current ratio for…