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Consulting Assignment Your supervisor asked to help review a portion of a clients stock portfolio to determine the risk / return profiles of 1 2
Consulting Assignment Your supervisor asked to help review a portion of a clients stock portfolio to determine the riskreturn profiles of stocks in the portfolio. Specifically, you have been asked to determine the monthly average returns and standard deviations for the stocks for the past five years. The stocks with their symbols in parentheses are:Apple Inc. AAPLAmazoncom Inc. AMZNBerkshire Hathaway Inc. BRKBCisco Systems, Inc. CSCOExxon Mobil Corporation XOMFacebook Inc. now Meta Platforms, Inc.FBIntel Corporation INTCJohnson & Johnson JNJPfizer Inc. PFETesla Inc. TSLAVisa Inc. VWalt Disney Company DISThe consulting firm can access expensive databases that provide all this information with a few simple keystrokes. Still, your supervisor wants you to build your research skills; thus, she asked you to gather the data yourself. She suggested the following data sources. Find price data for each stock on Yahoo! Finance financeyahoo.com by doing the following:a Enter the stock symbol. On the page for that stock, click Historical Data.b Enter the start date and the end date to cover the fiveyear period. Make sure you click monthly next to the date; the closing prices reported by Yahoo! will then be for the last day of each month.c Download the prices after updating the date range and frequency.d Keep the column Adjusted Close for the stock.e Repeat these steps for the remaining stocks, pasting each closing price right next to the other stocks, again making sure that the correct prices on the correct dates appear on the same rows Collect the monthly price for each stock for the past five years. Remember to use the Adjusted Close. The adjusted closing prices are adjusted to account for events like dividend payments and stock splits. You will compute returns from the percentage change in monthly adjusted prices Convert these prices to monthly returns as the percentage change in the monthly adjusted prices. Hint: Create a separate worksheet within the Excel file. Note that to compute a return for each month, you need a beginning and ending price, so you will not be able to compute the return for the first month Compute the mean monthly returns and standard deviations for the monthly returns of each of the stocks. Convert the monthly statistics to annual statistics for easier interpretation multiply the mean monthly return by and multiply the monthly standard deviation by the square root of Add a column in your Excel worksheet with each month's average return across stocks. This is the monthly return to an equally weighted portfolio of these stocks. Compute monthly returns' mean and standard deviation for the equally weighted portfolio. Doublecheck that the average return on this equally weighted portfolio is equal to the average return of all individual stocks. Convert these monthly statistics to annual statistics as described in Step for interpretation Generate an Excel plot using the annual statistics you have obtained andor computed, depicting standard deviation volatility on the xaxis and average return on the yaxis by following these steps:In your spreadsheet, establish three columns containing the statistics obtained in Steps and for each of the individual stocks and the equally weighted portfolio. The initial column should display the stock ticker, the second the annual standard deviation, and the third the annual mean return.Select and highlight the data in the last two columns standard deviation and meanNavigate to the "Insert" tab, choose "Chart," and then opt for XY Scatter Plot."Complete the chart wizard to finalize the plot.Confirm that all data points on the plot are appropriately labeled with the corresponding stock tickers What do you notice about the average of the volatilities standard deviations of the individual stocks, compared to the volatility of the equally weighted portfolio? In answering this question, be sure to reference the values calculated in your analysis.
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