Obtain monthly returns for RIM, the Royal Bank of Canada, and the S&P/TSX Composite Index for January

Question:

Obtain monthly returns for RIM, the Royal Bank of Canada, and the S&P/TSX Composite Index for January to December 2011. (Note: Monthly historical prices, adjusted for dividends, are available from ca.finance.yahoo.com. To obtain the data, go to the website and search using the ticker symbol, RIM.TO.)

a. Which firm do you expect to have a larger beta? Explain your reasoning.

b. Calculate the beta for each company.

c. Create a portfolio consisting of 50 percent in RIM and 50 percent in Royal Bank.

i. Calculate the monthly returns for the portfolio and calculate the beta of the portfolio using those monthly returns.

ii. Using Equation 9-8, calculate the beta of the portfolio.
iii. Compare the two betas.

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...