Question
In: Finance
Use the following data to explore the risk-return relation and the concept of beta for Apple...
Use the following data to explore the risk-return relation and the concept of beta for Apple stock, Alphabet (Google) stock, and the S&P 500 market index:
|
Year |
Apple Stock Price |
Alphabet Stock Price |
S&P 500 Market Index |
|
2017 |
$174.09 |
$1,072.01 |
2,601.42 |
|
2016 |
$115.82 |
$807.80 |
2,238.83 |
|
2015 |
$105.26 |
$765.84 |
2,043.94 |
|
2014 |
$113.99 |
$521.51 |
2,058.90 |
|
2013 |
$80.01 |
$559.76 |
1,848.36 |
|
2012 |
$72.80 |
$358.17 |
1,426.19 |
| Market risk premium: RPM = | 4.01% |
| Risk-free rate: rRF = | 1.30% |
- Calculate the portfolio beta of the four-stock portfolio and the required return on the portfolio (9 Points) ***Please Provide the Excel Functions
| Beta | Portfolio Weight | ||
| Apple | 25% | ||
| Stock A | 0.77 | 15% | |
| Stock B | 0.99 | 40% | |
| Stock C | 1.42 | 20% | |
| 100% | |||
| Portfolio Beta = | |||
| Risk-free rate | Market Risk Premium | Portfolio Beta | Required Return on Portfolio |
Solutions
Expert Solution
Beta of Apple = 0.086
Portfolio Beta = 0.086 * 0.25 + 0.77 * 0.15 + 0.99 * 0.40+1.42 * 0.2 = 0.817 Answer
Using CAPM,
Required Return on Apple = 1.3 +4.01* 0.086 = 1.64486
Required Return on Stock A = 1.3 +4.01 * 0.77 = 4.3877
Required Return on Stock B = 1.3 +4.01 * 0.99 = 5.2699
Required Return on Stock C = 1.3 +4.01 * 1.42 = 6.9942
Required Return on Portfolio = 1.64486 * 0.25 + 4.3877* 0.15 + 5.2699* 0.40+6.9942* 0.2 = 4.58 % Answer
Risk Free Rate = 1.3% Answer
Market Risk Premium = 4.01% Answer
Kindly inform me in case you have any queries.
A B C D 3 Year Apple S&P 500 Market 2017 174.09 2601.42 2016 115.82 2238.83 2015 105.26 2043.94 2014 113.99 2058.9 2013 80.01 1848.36 2012 72.8 1426.19 Considering it as a sample. Beta of Apple = Covariance(Apple, Market)/ Variance (Market) 14 Covariance Of (Apple,Market)= 13156.73819 =COVARIANCE.S(B4:B9,04:09) Answer Variance (Market)= 153700.7593 =VAR.S(C4:09) Answer 15 16 17 Beta of Apple= 0.0856 =D14/C15 Answer 18 19
jeff jeffy answered 2 years agoRelated Solutions
Use the following data to explore the risk-return relation and the concept of beta for Apple...
Use the following data to explore the risk-return relation and
the concept of beta for Apple stock, Alphabet (Google) stock, and
the S&P 500 market index:
Year
Apple Stock Price
Alphabet Stock Price
S&P 500 Market Index
2017
$174.09
$1,072.01
2,601.42
2016
$115.82
$807.80
2,238.83
2015
$105.26
$765.84
2,043.94
2014
$113.99
$521.51
2,058.90
2013
$80.01
$559.76
1,848.36
2012
$72.80
$358.17
1,426.19
E) Calculate the expected return on the market according to:
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Year
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Kroger Stock Price
S&P 500 Market Index
2020
$252.92
$30.71
3,234.85
2019
$156.23
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2,531.94
2018
$169.23
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2017
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2016
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2015
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Use the following data to explore the risk-return relation and
the concept of beta for Apple stock, Kroger stock, and the S&P
500 market index:
Year
Apple Stock Price
Kroger Stock Price
S&P 500 Market Index
2020
$252.92
$30.71
3,234.85
2019
$156.23
$27.66
2,531.94
2018
$169.23
$27.32
2,753.15
2017
$125.17
$29.52
2,276.98
2016
$108.41
$31.80
2,043.94
2015
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2,058.20
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CAPM
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C
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