Download Monthly Adjusted Prices for General Motors (GM) and Harley Davidson (HDI) from the Standard & Poors

Question:

Download “Monthly Adjusted Prices” for General Motors (GM) and Harley Davidson (HDI) from the Standard & Poor’s Market Insight website ( HYPERLINK "www.mhhe.com/" www.mhhe.com/edumarketinsight).

a. Calculate each company’s beta, following the procedure described in Practice Question 13.

b. Calculate the annual standard deviation of the market from the monthly returns for the S&P 500. Use the Excel function STDEV, and multiply by the square root of 12 to convert to annual units. Also calculate the annual standard deviations for GM and HDI.

c. Let’s assume that your answers to (a) and (b) are good forecasts. What would be the standard deviation of a well-diversified portfolio of stocks with betas equal to Harley Davidson’s beta? How about a well-diversified portfolio of stocks with GM’s beta?

d. How much of the total risk of GM was unique risk? How much of HDI’s?

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