## 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%**