Answers
Answer 1)
Average Annula Return of Stock 1
| Stock 1 | ||
| Stock price | Dividend | Returns (Price at end + Div. of previous year - Price at beg.) / Price at Beginning |
| 25.88 | 1.73 | 24.13% |
| 22.13 | 1.59 | -4.53% |
| 24.75 | 1.5 | 62.31% |
| 16.13 | 1.43 | 2.46% |
| 17.06 | 1.35 | 60.31% |
| 11.44 | 1.28 |
Average Annual Return = Sum of all returns/ No. of Years
=28.94%
Answer 2)
Systematic Risk is the Beta of stock which cannot be mitigated by diversification. Also known as the undiversifiable risk.
| Stock price | Returns on Stock Expect Dividend |
| 25.88 | |
| 22.13 | 16.95% |
| 24.75 | -10.59% |
| 16.13 | 53.44% |
| 17.06 | -5.45% |
| 11.44 | 49.13% |
| Market Index | Returns |
| 17495.97 | |
| 13178.55 | 32.8% |
| 13019.97 | 1.2% |
| 9651.05 | 34.9% |
| 8403.42 | 14.8% |
| 7058.96 | 19.0% |
We calculate the returns for both Stock 1 and Market Index . Return = (Price at end - Price at Beginning) / Price at beginning
We then run a regression analysis on the returns.
Using Excel, Select Data , Select Data Analysis, Select Regression.
Y variable will be returns on stock and X variable will be returns on market index.
Systematic Risk of Stock 1 = 1.49
Answer 3)
Systematic Risk is the Beta of stock which cannot be mitigated by diversification.
Also known as the undiversifiable risk.
| Stock price | Returns on Stock Price (Not considering Dividend) |
| 73.13 | |
| 78.45 | -6.78% |
| 73.13 | 7.27% |
| 85.88 | -14.85% |
| 90 | -4.58% |
| 83.63 | 7.62% |
| Market Index | Returns |
| 17495.97 | |
| 13178.55 | 32.8% |
| 13019.97 | 1.2% |
| 9651.05 | 34.9% |
| 8403.42 | 14.8% |
| 7058.96 | 19.0% |
We calculate the returns for both Stock 2 and Market Index . Return = (Price at end - Price at Beginning) / Price at beginning
We then run a regression analysis on the returns.
Using Excel, Select Data , Select Data Analysis, Select Regression.
Y variable will be returns on stock and X variable will be returns on market index.
Systematic Risk of Stock 2= -0.55
Answer 4)
Average annual return of Stock 2
| Stock 2 | ||
| Stock price | Dividend | Returns (Price at end + Div. of previous year - Price at beg.) / Price at Beginning |
| 73.13 | 4.5 | -1.24% |
| 78.45 | 4.35 | 12.92% |
| 73.13 | 4.13 | -10.48% |
| 85.88 | 3.75 | -.82% |
| 90 | 3.38 | 11.2% |
| 83.63 | 3 |
Average Annual Return = Sum of all returns/ No. of Years
= 2.32%
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