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.

1. 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
2. Calculate the average monthly return and the standard deviation for both the S&P 500 and Ford.
3. 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.)
4. From your graph, describe the nature of the relationship between Ford stock returns and the returns for the S&P 500 Index.

Price: $2.99

Solution: The downloadable solution consists of 3 pages
Deliverable: Word Document