(Step-by-Step) (Expected return, standard deviation, and capital asset pricing model) The following are the end-ofmonth prices for both the Standard Poor’s
Question: ( Expected return, standard deviation, and capital asset pricing model ) The following are the end-ofmonth
prices for both the Standard & Poor’s 500 Index and Ford Motor Company’s common stock.
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Using the data here, calculate the holding-period returns for each of the months.
MONTH AND YEAR S&P 500 INDEX FORD
March-05 $1,180.59 $11.33
April-05 1,156.85 9.11
May-05 1,191.50 9.98
June-05 1,191.33 10.24
July-05 1,234.18 10.74
August-05 1,220.33 9.97
September-05 1,228.81 9.86
October-05 1,207.01 8.32
November-05 1,249.48 8.13
December-05 1,248.29 7.72
January-06 1,280.08 8.58
February-06 1,280.66 7.97
March-06 1,291.24 7.96 - Calculate the average monthly return and the standard deviation for both the S&P 500 and Ford.
- Develop a graph that shows the relationship between the Ford stock returns and the S&P 500 Index. (Show the Ford returns on the vertical axis and the S&P 500 Index returns on the horizontal axis as done in Figure 6-5.)
- From your graph, describe the nature of the relationship between Ford stock returns and the returns for the S&P 500 Index.
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