PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 9, Problem 1SQ
(VAR.P and STDEV.P) Choose two well-known stocks and download the latest 61 months of adjusted prices from finance.yahoo.com. Calculate the monthly returns for each stock. Now find the variance and standard deviation of the returns for each stock by using VAR.P and STDEV.P. Annualize the variance by multiplying by 12 and the standard deviation by multiplying by the square root of 12.
Expert Solution & Answer
Summary Introduction
To determine: The variance and standard deviation of two stocks.
Answer to Problem 1SQ
Company AL’s variance is 0.0008497 and standard deviation is 2.91%. Company NX’s variance is 0.0014812 and standard deviation is 3.85%.
Explanation of Solution
Determine the variance and standard deviation of Company AL
Excel Spreadsheet:
Excel Workings:
Therefore the Company AL’s variance is 0.0008497 and standard deviation is 2.91%. Company NX’s variance is 0.0014812 and standard deviation is 3.85%.
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he last four years of returns for a stock are as shown here:
LOADING...
.
a. What is the average annual return?
b. What is the variance of the stock's returns?
c. What is the standard deviation of the stock's returns?
Note:
Notice that the average return and standard deviation must be entered in percentage format. The variance must be entered in decimal format.
Question content area bottom
Part 1
a. What is the average annual return?
The average return is
enter your response here%.
(Round to two decimal places.)
Part 2
b. What is the variance of the stock's returns?
The variance of the returns is
enter your response here.
(Round to five decimal places.)
Part 3
c. What is the standard deviation of the stock's returns?
The standard deviation is
enter your response here%.
(Round to two decimal places.)
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Data table
(Click on the following icon
in order…
Here are the returns on two stocks.
A. Calculate the variance and standard deviation of each stock. Which stock is riskier if held on its own?
B. Now calculate the returns in each month of a portfolio that invests an equal amount each month in the two stocks
C. Is the variance more or less than halfway between the variance of the two Individual stocks?
The last four years of returns for a stock are as shown here:
LOADING...
.
a. What is the average annual return?
b. What is the variance of the stock's returns?
c. What is the standard deviation of the stock's returns?
Note:
Notice that the average return and standard deviation must be entered in percentage format. The variance must be entered in decimal format.
Question content area bottom
Part 1
a. What is the average annual return?
The average return is
enter your response here%.
(Round to two decimal places.)
Part 2
b. What is the variance of the stock's returns?
The variance of the returns is
enter your response here.
(Round to five decimal places.)
Part 3
c. What is the standard deviation of the stock's returns?
The standard deviation is
enter your response here%.
(Round to two decimal places.)
figure
Year: 1, 2, 3, 4
Return: -4.2%, +27.9%, +11.8%, +3.8%
Chapter 9 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 9 - (VAR.P and STDEV.P) Choose two well-known stocks...Ch. 9 - (AVERAGE, VAR.P and STDEV.P) Now calculate the...Ch. 9 - (SLOPE) Download the Standard Poors index for the...Ch. 9 - Definitions Define the following terms: a. Cost of...Ch. 9 - True/false True or false? a. The company cost of...Ch. 9 - Company cost of capital Quark Productions (Give...Ch. 9 - Company cost of capital The total market value of...Ch. 9 - Company cost of capital You are given the...Ch. 9 - Company cost of capital Nero Violins has the...Ch. 9 - WACC A company is 40% financed by risk-free debt....
Ch. 9 - WACC Binomial Tree Farms financing includes 5...Ch. 9 - Prob. 10PSCh. 9 - Measuring risk The following table shows estimates...Ch. 9 - Prob. 12PSCh. 9 - Asset betas Which of these projects is likely to...Ch. 9 - Asset betas EZCUBE Corp. is 50% financed with...Ch. 9 - Prob. 15PSCh. 9 - Prob. 16PSCh. 9 - Prob. 17PSCh. 9 - Fudge factors John Barleycorn estimates his firms...Ch. 9 - Prob. 19PSCh. 9 - Prob. 20PSCh. 9 - Certainty equivalents A project has a forecasted...Ch. 9 - Certainty equivalents A project has the following...Ch. 9 - Prob. 23PSCh. 9 - Beta of costs Suppose that you are valuing a...Ch. 9 - Fudge factors An oil company executive is...
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