question archive Use the following stock data to answer the question below
Use the following stock data to answer the question below
Subject:FinancePrice: Bought3
Use the following stock data to answer the question below.
| Price | |||
| Year | MSFT | IBM | S&P500 |
| 2008 | 19.44 | 84.16 | 903.25 |
| 2009 | 30.48 | 130.9 | 1115.1 |
| 2010 | 27.91 | 146.76 | 1257.64 |
| 2011 | 25.96 | 183.88 | 1257.6 |
| 2012 | 26.71 | 191.55 | 1426.19 |
| 2013 | 37.41 | 187.57 | 1848.36 |
| 2014 | 46.45 | 160.44 | 2058.9 |
1. What is the return for each year for each stock and the S&P500 Index? (What formula do I use in excel)?
2. What is the average return over the period for each stock and the S&P500?
3. What is the standard deviation for MSFT and IBM? Which stock is the riskiest?
4. What is the beta of MSFT and IBM?
5. If the risk-free rate is 5%, what is the expected return of each stock according to the CAPM (SML)? (Use the return of the S&P500 as the return of the market)
6. Given the average returns, you calculated in question 2, if you wanted an average return of 15%, what percentage of your portfolio should be invested in MSFT and IBM?
7. What will the portfolio standard deviation be of the portfolio created using the target weights in question 6? Assume the covariance of MSFT and IBM is 141.24.
