From her Investment Analysis class, Laura has been given an assignment to evaluate several securities on a

Question:

From her Investment Analysis class, Laura has been given an assignment to evaluate several securities on a risk-return tradeoff basis. The specific securities to be researched are International Business Machines, Helmerich & Payne, Inc., and the S&P 500 Index. The respective ticker symbols for the are IBM and HR She finds the following data on the securities in question.

Year 2009 2006 2007 $ 108.10 2008 2010 2011 PricepM $ 183.88 %2$ 97.15 $ 84.16 1.90 $ 146.76 2.50 $ 130.90 2.15 1.10 1.5

Note:The value of the S&P 500 index includes dividends. Questions Part One
a. Use the data that Laura has found on the 3 securities and create a spreadsheet to calculate the holding period return for each year and the average return over a 5-year period. Specifically, the HPR will be based upon 5 unique periods of 1 year (i.e., 2006 to 2007, 2007 to 2008, 2008 to 2009, 2009 to 2010, 2010 to 2011). Use the following formula:
PR = [Inc + (Vn- vo)]/v0
Where
Inc = income during period
Vn = ending investment value
Vo = beginning investment value
Part TWO
Create a spreadsheet similar to the spreadsheet for Table 4.9 (on page 139), which can be viewed at www.myfinancelab.com. in order to evaluate the risk-return tradeoff.
b. Calculate the standard deviations of the returns for IBM, HP, and the S&P 500 Index.
c. What industries are associated with IBM and HP?
d. Based on your answer in part c and your results for the average return and the standard deviation, what conclusions can Laura make about investing in either IBM or HP?

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