Sheet 5 Use Sheet 5 to complete the following Date GOOG Return NFLX Return Market Return Risk-Free Return GOOG Excess Return* NFLX Excess Return* Market Excess Return* 3/1/2017 0.7700 4.0000 3.7200 0.0050 0.2700 3.5000 3.2200 4/1/2017 9.2100 2.9700 -0.0400 0.0050 8.7100 2.4700 -0.5400 5/1/2017 6.5000 7.1400 0.9100 0.0050 6.0000 6.6400 0.4100 6/1/2017 -5.8200 -8.3800 1.1600 0.0050 -6.3200 -8.8800 0.6600 7/1/2017 2.4000 21.5800 0.4800 0.0050 1.9000 21.0800 -0.0200 8/1/2017 0.9500 -3.8300 1.9300 0.0050 0.4500 -4.3300 1.4300 9/1/2017 2.1100 3.8000 0.0500 0.0050 1.6100 3.3000 -0.4500 10/1/2017 6.0000 8.3200 1.9300 0.0050 5.5000 7.8200 1.4300 11/1/2017 0.4700 -4.5100 2.2200 0.0050 -0.0300 -5.0100 1.7200 12/1/2017 2.4500 2.3400 2.8100 0.0050 1.9500 1.8400 2.3100 1/1/2018 11.8100 40.8100 0.9800 0.0050 11.3100 40.3100 0.4800 2/1/2018 -5.5700 7.8000 5.6200 0.0050 -6.0700 7.3000 5.1200 3/1/2018 -6.6000 1.3600 -3.8900 0.0050 -7.1000 0.8600 -4.3900 4/1/2018 -1.4000 5.7900 -2.6900 0.0050 -1.9000 5.2900 -3.1900 5/1/2018 6.6500 12.5300 0.2700 0.0050 6.1500 12.0300 -0.2300 6/1/2018 2.8300 11.3300 2.1600 0.0050 2.3300 10.8300 1.6600 7/1/2018 9.1100 -13.7900 0.4800 0.0050 8.6100 -14.2900 -0.0200 8/1/2018 0.0800 8.9600 3.6000 0.0050 -0.4200 8.4600 3.1000 9/1/2018 -2.0300 1.7500 3.0300 0.0050 -2.5300 1.2500 2.5300 10/1/2018 -9.7800 -19.3400 0.4300 0.0050 -10.2800 -19.8400 -0.0700 11/1/2018 1.6400 -5.1900 -6.9400 0.0050 1.1400 -5.6900 -7.4400 12/1/2018 -5.3700 -6.4600 1.7900 0.0050 -5.8700 -6.9600 1.2900 1/1/2019 7.8000 26.8400 -9.1800 0.0050 7.3000 26.3400 -9.6800 2/1/2019 0.3200 5.4800 7.8700 0.0050 -0.1800 4.9800 7.3700 3/1/2019 4.7700 -0.4300 2.9700 0.0050 4.2700 -0.9300 2.4700 4/1/2019 1.2900 3.9200 1.7900 0.0050 0.7900 3.4200 1.2900 5/1/2019 -7.1400 -7.3600 3.9300 0.0050 -7.6400 -7.8600 3.4300 6/1/2019 -2.0600 7.0000 -6.5800 0.0050 -2.5600 6.5000 -7.0800 7/1/2019 12.5600 -12.0700 6.8900 0.0050 12.0600 -12.5700 6.3900 8/1/2019 -2.3500 -9.0500 1.3100 0.0050 -2.8500 -9.5500 0.8100 9/1/2019 2.6000 -8.9000 -1.8100 0.0050 2.1000 -9.4000 -2.3100 10/1/2019 3.3700 7.3900 1.7200 0.0050 2.8700 6.8900 1.2200 11/1/2019 3.5600 9.4800 2.0400 0.0050 3.0600 8.9800 1.5400 12/1/2019 2.4600 2.8300 3.4000 0.0050 1.9600 2.3300 2.9000 1/1/2020 7.2700 6.6500 2.8600 0.0050 6.7700 6.1500 2.3600 SECTION 3 Average Excess Return Std. Deviation of Return Beta Covariance**
Sheet 5 Use Sheet 5 to complete the following Date GOOG Return NFLX Return Market Return Risk-Free Return GOOG Excess Return* NFLX Excess Return* Market Excess Return* 3/1/2017 0.7700 4.0000 3.7200 0.0050 0.2700 3.5000 3.2200 4/1/2017 9.2100 2.9700 -0.0400 0.0050 8.7100 2.4700 -0.5400 5/1/2017 6.5000 7.1400 0.9100 0.0050 6.0000 6.6400 0.4100 6/1/2017 -5.8200 -8.3800 1.1600 0.0050 -6.3200 -8.8800 0.6600 7/1/2017 2.4000 21.5800 0.4800 0.0050 1.9000 21.0800 -0.0200 8/1/2017 0.9500 -3.8300 1.9300 0.0050 0.4500 -4.3300 1.4300 9/1/2017 2.1100 3.8000 0.0500 0.0050 1.6100 3.3000 -0.4500 10/1/2017 6.0000 8.3200 1.9300 0.0050 5.5000 7.8200 1.4300 11/1/2017 0.4700 -4.5100 2.2200 0.0050 -0.0300 -5.0100 1.7200 12/1/2017 2.4500 2.3400 2.8100 0.0050 1.9500 1.8400 2.3100 1/1/2018 11.8100 40.8100 0.9800 0.0050 11.3100 40.3100 0.4800 2/1/2018 -5.5700 7.8000 5.6200 0.0050 -6.0700 7.3000 5.1200 3/1/2018 -6.6000 1.3600 -3.8900 0.0050 -7.1000 0.8600 -4.3900 4/1/2018 -1.4000 5.7900 -2.6900 0.0050 -1.9000 5.2900 -3.1900 5/1/2018 6.6500 12.5300 0.2700 0.0050 6.1500 12.0300 -0.2300 6/1/2018 2.8300 11.3300 2.1600 0.0050 2.3300 10.8300 1.6600 7/1/2018 9.1100 -13.7900 0.4800 0.0050 8.6100 -14.2900 -0.0200 8/1/2018 0.0800 8.9600 3.6000 0.0050 -0.4200 8.4600 3.1000 9/1/2018 -2.0300 1.7500 3.0300 0.0050 -2.5300 1.2500 2.5300 10/1/2018 -9.7800 -19.3400 0.4300 0.0050 -10.2800 -19.8400 -0.0700 11/1/2018 1.6400 -5.1900 -6.9400 0.0050 1.1400 -5.6900 -7.4400 12/1/2018 -5.3700 -6.4600 1.7900 0.0050 -5.8700 -6.9600 1.2900 1/1/2019 7.8000 26.8400 -9.1800 0.0050 7.3000 26.3400 -9.6800 2/1/2019 0.3200 5.4800 7.8700 0.0050 -0.1800 4.9800 7.3700 3/1/2019 4.7700 -0.4300 2.9700 0.0050 4.2700 -0.9300 2.4700 4/1/2019 1.2900 3.9200 1.7900 0.0050 0.7900 3.4200 1.2900 5/1/2019 -7.1400 -7.3600 3.9300 0.0050 -7.6400 -7.8600 3.4300 6/1/2019 -2.0600 7.0000 -6.5800 0.0050 -2.5600 6.5000 -7.0800 7/1/2019 12.5600 -12.0700 6.8900 0.0050 12.0600 -12.5700 6.3900 8/1/2019 -2.3500 -9.0500 1.3100 0.0050 -2.8500 -9.5500 0.8100 9/1/2019 2.6000 -8.9000 -1.8100 0.0050 2.1000 -9.4000 -2.3100 10/1/2019 3.3700 7.3900 1.7200 0.0050 2.8700 6.8900 1.2200 11/1/2019 3.5600 9.4800 2.0400 0.0050 3.0600 8.9800 1.5400 12/1/2019 2.4600 2.8300 3.4000 0.0050 1.9600 2.3300 2.9000 1/1/2020 7.2700 6.6500 2.8600 0.0050 6.7700 6.1500 2.3600 SECTION 3 Average Excess Return Std. Deviation of Return Beta Covariance**
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Concept explainers
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
100%
Sheet 5
Use Sheet 5 to complete the following
Date | GOOG Return | NFLX Return | Market Return | Risk-Free Return | GOOG Excess Return* | NFLX Excess Return* | Market Excess Return* | |
3/1/2017 | 0.7700 | 4.0000 | 3.7200 | 0.0050 | 0.2700 | 3.5000 | 3.2200 | |
4/1/2017 | 9.2100 | 2.9700 | -0.0400 | 0.0050 | 8.7100 | 2.4700 | -0.5400 | |
5/1/2017 | 6.5000 | 7.1400 | 0.9100 | 0.0050 | 6.0000 | 6.6400 | 0.4100 | |
6/1/2017 | -5.8200 | -8.3800 | 1.1600 | 0.0050 | -6.3200 | -8.8800 | 0.6600 | |
7/1/2017 | 2.4000 | 21.5800 | 0.4800 | 0.0050 | 1.9000 | 21.0800 | -0.0200 | |
8/1/2017 | 0.9500 | -3.8300 | 1.9300 | 0.0050 | 0.4500 | -4.3300 | 1.4300 | |
9/1/2017 | 2.1100 | 3.8000 | 0.0500 | 0.0050 | 1.6100 | 3.3000 | -0.4500 | |
10/1/2017 | 6.0000 | 8.3200 | 1.9300 | 0.0050 | 5.5000 | 7.8200 | 1.4300 | |
11/1/2017 | 0.4700 | -4.5100 | 2.2200 | 0.0050 | -0.0300 | -5.0100 | 1.7200 | |
12/1/2017 | 2.4500 | 2.3400 | 2.8100 | 0.0050 | 1.9500 | 1.8400 | 2.3100 | |
1/1/2018 | 11.8100 | 40.8100 | 0.9800 | 0.0050 | 11.3100 | 40.3100 | 0.4800 | |
2/1/2018 | -5.5700 | 7.8000 | 5.6200 | 0.0050 | -6.0700 | 7.3000 | 5.1200 | |
3/1/2018 | -6.6000 | 1.3600 | -3.8900 | 0.0050 | -7.1000 | 0.8600 | -4.3900 | |
4/1/2018 | -1.4000 | 5.7900 | -2.6900 | 0.0050 | -1.9000 | 5.2900 | -3.1900 | |
5/1/2018 | 6.6500 | 12.5300 | 0.2700 | 0.0050 | 6.1500 | 12.0300 | -0.2300 | |
6/1/2018 | 2.8300 | 11.3300 | 2.1600 | 0.0050 | 2.3300 | 10.8300 | 1.6600 | |
7/1/2018 | 9.1100 | -13.7900 | 0.4800 | 0.0050 | 8.6100 | -14.2900 | -0.0200 | |
8/1/2018 | 0.0800 | 8.9600 | 3.6000 | 0.0050 | -0.4200 | 8.4600 | 3.1000 | |
9/1/2018 | -2.0300 | 1.7500 | 3.0300 | 0.0050 | -2.5300 | 1.2500 | 2.5300 | |
10/1/2018 | -9.7800 | -19.3400 | 0.4300 | 0.0050 | -10.2800 | -19.8400 | -0.0700 | |
11/1/2018 | 1.6400 | -5.1900 | -6.9400 | 0.0050 | 1.1400 | -5.6900 | -7.4400 | |
12/1/2018 | -5.3700 | -6.4600 | 1.7900 | 0.0050 | -5.8700 | -6.9600 | 1.2900 | |
1/1/2019 | 7.8000 | 26.8400 | -9.1800 | 0.0050 | 7.3000 | 26.3400 | -9.6800 | |
2/1/2019 | 0.3200 | 5.4800 | 7.8700 | 0.0050 | -0.1800 | 4.9800 | 7.3700 | |
3/1/2019 | 4.7700 | -0.4300 | 2.9700 | 0.0050 | 4.2700 | -0.9300 | 2.4700 | |
4/1/2019 | 1.2900 | 3.9200 | 1.7900 | 0.0050 | 0.7900 | 3.4200 | 1.2900 | |
5/1/2019 | -7.1400 | -7.3600 | 3.9300 | 0.0050 | -7.6400 | -7.8600 | 3.4300 | |
6/1/2019 | -2.0600 | 7.0000 | -6.5800 | 0.0050 | -2.5600 | 6.5000 | -7.0800 | |
7/1/2019 | 12.5600 | -12.0700 | 6.8900 | 0.0050 | 12.0600 | -12.5700 | 6.3900 | |
8/1/2019 | -2.3500 | -9.0500 | 1.3100 | 0.0050 | -2.8500 | -9.5500 | 0.8100 | |
9/1/2019 | 2.6000 | -8.9000 | -1.8100 | 0.0050 | 2.1000 | -9.4000 | -2.3100 | |
10/1/2019 | 3.3700 | 7.3900 | 1.7200 | 0.0050 | 2.8700 | 6.8900 | 1.2200 | |
11/1/2019 | 3.5600 | 9.4800 | 2.0400 | 0.0050 | 3.0600 | 8.9800 | 1.5400 | |
12/1/2019 | 2.4600 | 2.8300 | 3.4000 | 0.0050 | 1.9600 | 2.3300 | 2.9000 | |
1/1/2020 | 7.2700 | 6.6500 | 2.8600 | 0.0050 | 6.7700 | 6.1500 | 2.3600 | |
SECTION 3 | Average Excess Return | |||||||
Std. Deviation of Return | ||||||||
Beta | ||||||||
Covariance** |
![Portfolio
Weight on GOOG
NFLX
Return
Portfolio Beta
Standard
Defensive/Aggressive
0.1
0.9
0.2
0.8
0.3
0.7
0.4
0.6
0.5
0.5
0.6
0.4
0.7
0.3
0.8
0.2
0.9
0.1
1](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7ec5911b-fb6f-4766-9817-fd9362ac92fb%2F6a9d9d10-dade-45c7-a139-ed8c6527534b%2Fvied7ww_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Portfolio
Weight on GOOG
NFLX
Return
Portfolio Beta
Standard
Defensive/Aggressive
0.1
0.9
0.2
0.8
0.3
0.7
0.4
0.6
0.5
0.5
0.6
0.4
0.7
0.3
0.8
0.2
0.9
0.1
1
![Draw a Characteristic Line*** for GOOG
Draw a Characteristic Line*** for NFLX
Notes:
* Excess return is the return that is earned over and above the risk free return
** Covariance measures the combined risk of holding two stocks at the same time. It is computed by using the Covariance function in Excel
*** A characteristic line is the line of best fit which describes the scatter plot when a stock's excess return is measure on the X-Axis (Dependent
variable) and the market's excess return is measured on the Y-Axis (Independent variable). You can refer to a quick demonstration here:
https://www.youtube.com/watch?v=HX06ANAGWYQ
**** For computing the standard deviation of the portfolio, the following formula should be used:
w?o,² + w?o} + 2w, w,Cov
%3D
In the formula above, the left hand side of the equation signifies standard deviation of the portfolio.
The greek letter sigma is the general significator of standard deviation.
W, is the weight placed on the first stock in the portfolio.
W, is the weight placed on the second stock in the portfolio.
Cov12 is the covariance between the first and second stock](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7ec5911b-fb6f-4766-9817-fd9362ac92fb%2F6a9d9d10-dade-45c7-a139-ed8c6527534b%2Fdzsm21y_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Draw a Characteristic Line*** for GOOG
Draw a Characteristic Line*** for NFLX
Notes:
* Excess return is the return that is earned over and above the risk free return
** Covariance measures the combined risk of holding two stocks at the same time. It is computed by using the Covariance function in Excel
*** A characteristic line is the line of best fit which describes the scatter plot when a stock's excess return is measure on the X-Axis (Dependent
variable) and the market's excess return is measured on the Y-Axis (Independent variable). You can refer to a quick demonstration here:
https://www.youtube.com/watch?v=HX06ANAGWYQ
**** For computing the standard deviation of the portfolio, the following formula should be used:
w?o,² + w?o} + 2w, w,Cov
%3D
In the formula above, the left hand side of the equation signifies standard deviation of the portfolio.
The greek letter sigma is the general significator of standard deviation.
W, is the weight placed on the first stock in the portfolio.
W, is the weight placed on the second stock in the portfolio.
Cov12 is the covariance between the first and second stock
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