Bartman Industries' and Reynolds Inc.'s stock prices and dividends, along with the Winslow 5000 Index, are shown

here for the period 2009-2014. The Winslow 5000 data are adjusted to include dividends.

1) Use the data to calculate annual rates of return for Bartman, Reynolds, and the Winslow 5000 Index. Then calculate each entity's average return over the 5-year period. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to get the capital gain or loss, adding the dividend to the capital gain or loss, and dividing the result by the beginning price. Assume that dividends are already included in the index. Also, you cannot calculate the rate of return for 2009 because you do not have 2008 data).

2) Calculate the standard deviations of the returns for Bartman, Reynolds, and the Wiinslow 5000. (Hint: Use the sample standard deviation formula, Equation 8.2a in this chapter, which corresponds to the STDEV function in Excel).

3) Calculate the coefficients of variation (CV) for Bartman, Reynolds, and the Wiinslow 5000.

* You may answer all questions above by completing the gray colored cells in the table below. However, you must do your calculations using the formula bar so you can show how all the numbers in the cells are obtained. Round the number in percentage upto the second decimal place (e.g., 2.3567..% 2.36%)

4) i) Which stock seems to be the most risky one on a stand-alone basis? Bartman or Reynolds?

ii) Which stock seems to be the most risky one on a CV basis? Bartman or Reynolds?

i) on a stand-alone basis

ii) on a CV basis

5) Construct a scatter diagram with trendline that shows both Bartmans and Reynolds returns on the vertical axis and the Winslow 5000 Indexs returns on the horizontal axis using the returns you obtained above. (Hint: Please go to YouTube and type 'scatter plot and trendline in excel' in search box. You will see tons of videos! For example, https://www.youtube.com/watch?v=Bm5w7OlpaJs

6) Estimate Bartmans and Reynolds betas by running 'slope' function in Excel. (Hint: Go to the function wizard in Excel and type =slope( Then, click on the formulas tab, fx and you will see a dialog box. Also, check the tabsheet labeled with 'Beta' in an excel file "Ret_Risk.xls" in the folder of 'Supplemental Resources'. Also, you can find the beta values from the trend line equations on the scatter plot as your answer to part 5).

Bartman's beta

Reynolds's beta

7) Assume the risk-free rate on long-term Treasury bonds is 6.04%. Assume also that the average annual return on the Winslow 5000 is 11% as the expected return on the market. Use the SML equation (i.e., CAPM) to calculate the two companies' required returns.

Bartman's Required Return
Reynolds's Required Return

Data as given in the problem are shown below: Bartman Industries Reynolds Inc. Winslow 5000 Stock Price $17.25 14.75 16.50 10.75 11.37 7.62 Dividend Holdin od retum Stock Price $48.75 52.30 48.75 57.25 60.00 55.75 Dividend Holding period returm Includes Divs. Holding od retum Year 2014 2013 2012 2011 2010 2009 $1.15 1.06 1.00 0.95 0.90 $3.00 2.90 2.75 2.50 2.25 11,663.98 8,785.70 8,679.98 6,434.03 5,602.28 4,705.97 -year average return (Return) Standard Deviation (Risk) Use 'STDEV function Coefficients of Variation