Question

In: Finance

1 - Please use 3 years monthly return data from Apple stock to find the arithmetic...

1 - Please use 3 years monthly return data from Apple stock to find the arithmetic and geometric average rate of return of this stock, total risk of this stock, and the normal distribution of this stock returns.

2 - Based on the beta information, please use an appropriate model to decide if this stock is overpriced or underpriced. You can take 3 years average rate of return as the expected rate of return, the 3 years average rate of return on S&P 500 index as the market return, and the 3 years average Treasury note rate of return as the risk free rate.

Solutions

Expert Solution

Date Open Close RETURNS Market return on S&P500(3 years)
01-11-2017 42.4675 42.962502 0.011656 0.000631047
01-12-2017 42.4875 42.307499 -0.00424 0.010778423
01-01-2018 42.54 41.857498 -0.01604 0.052196041
01-02-2018 41.7925 44.529999 0.065502 -0.036435894
01-03-2018 44.635 41.945 -0.06027 -0.027382626
01-04-2018 41.66 41.314999 -0.00828 0.005544095 Variance(apple) Covariance(apple,s&p500)
01-05-2018 41.6025 46.717499 0.122949 0.023575862 0.009599527 0.003955973
01-06-2018 46.9975 46.2775 -0.01532 -0.00012132 Beta(apple) 0.412100781
01-07-2018 45.955 47.572498 0.035197 0.041161607
01-08-2018 49.7825 56.907501 0.143123 0.028481127
01-09-2018 57.1025 56.435001 -0.01169 0.005875131
01-10-2018 56.9875 54.715 -0.03988 -0.073318108
01-11-2018 54.7625 44.645 -0.18475 0.015671974
01-12-2018 46.115 39.435001 -0.14486 -0.101648415
01-01-2019 38.7225 41.610001 0.074569 0.091701174
01-02-2019 41.74 43.287498 0.037075 0.030407176
01-03-2019 43.57 47.487499 0.089913 0.012929624
01-04-2019 47.91 50.1675 0.04712 0.034121735
01-05-2019 52.47 43.767502 -0.16586 -0.067834562
01-06-2019 43.9 49.48 0.127107 0.069136073
01-07-2019 50.7925 53.259998 0.04858 0.003018759
01-08-2019 53.475 52.185001 -0.02412 -0.01807192
01-09-2019 51.6075 55.9925 0.084968 0.023282828
01-10-2019 56.2675 62.189999 0.105256 0.018054865
01-11-2019 62.385 66.8125 0.070971 0.029586462
01-12-2019 66.8175 73.412498 0.098702 0.027650788
01-01-2020 74.06 77.377502 0.044795 -0.005901957
01-02-2020 76.075 68.339996 -0.10168 -0.086980693
01-03-2020 70.57 63.572498 -0.09916 -0.131019923
01-04-2020 61.625 73.449997 0.191886 0.165867323
01-05-2020 71.5625 79.485001 0.110707 0.061071617
01-06-2020 79.4375 91.199997 0.148072 0.020241679
01-07-2020 91.28 106.260002 0.16411 0.053188813
01-08-2020 108.2 129.039993 0.192606 0.064487008
01-09-2020 132.76 115.809998 -0.12767 -0.041181016
01-10-2020 117.64 115.980003 -0.01411 0.012123857
20-10-2020 116.2 117.592499 0.011984 0.001087473
Arithmatic 2.73%
Geometric -5.62%

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