Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 26, 2024

Correlation Matrix Security IBM KO BMY ORCL MMM BAX BIG NFLX AKAM GE SPY IWM EFA EEM SHY IEF TLT LQD HYG IBM 1 0.289

Correlation Matrix

Security IBM KO BMY ORCL MMM BAX BIG NFLX AKAM GE SPY IWM EFA EEM SHY IEF TLT LQD HYG

IBM 1 0.289 0.185 0.589 0.524 0.368 0.215 0.179 0.255 0.539 0.622 0.539 0.568 0.514 -0.127 -0.252 -0.246 0.023 0.429

KO 0.289 1 0.162 0.316 0.447 0.283 0.184 0.187 0.194 0.393 0.52 0.359 0.444 0.491 0.002 0.012 0.021 0.135 0.417

BMY 0.185 0.162 1 0.262 0.242 0.247 0.155 0.143 0.117 0.283 0.348 0.313 0.264 0.198 -0.053 -0.147 -0.155 -0.08 0.197

ORCL 0.589 0.316 0.262 1 0.535 0.432 0.249 0.311 0.404 0.5 0.739 0.636 0.664 0.628 -0.178 -0.29 -0.31 -0.048 0.558

MMM 0.524 0.447 0.242 0.535 1 0.425 0.231 0.135 0.228 0.672 0.703 0.585 0.617 0.586 -0.136 -0.218 -0.249 0.012 0.51

BAX 0.368 0.283 0.247 0.432 0.425 1 0.086 0.265 0.257 0.415 0.569 0.476 0.516 0.487 -0.141 -0.175 -0.159 0.019 0.453

BIG 0.215 0.184 0.155 0.249 0.231 0.086 1 0.092 0.187 0.259 0.376 0.483 0.275 0.268 -0.054 -0.092 -0.074 0.048 0.231

NFLX 0.179 0.187 0.143 0.311 0.135 0.265 0.092 1 0.225 0.254 0.372 0.317 0.284 0.314 -0.11 -0.106 -0.082 -0.052 0.25

AKAM 0.255 0.194 0.117 0.404 0.228 0.257 0.187 0.225 1 0.372 0.479 0.417 0.437 0.412 -0.193 -0.21 -0.203 -0.053 0.333

GE 0.539 0.393 0.283 0.5 0.672 0.415 0.259 0.254 0.372 1 0.744 0.651 0.635 0.603 -0.229 -0.319 -0.32 -0.089 0.504

SPY 0.622 0.52 0.348 0.739 0.703 0.569 0.376 0.372 0.479 0.744 1 0.877 0.857 0.807 -0.276 -0.392 -0.375 -0.054 0.742

IWM 0.539 0.359 0.313 0.636 0.585 0.476 0.483 0.317 0.417 0.651 0.877 1 0.74 0.688 -0.271 -0.386 -0.365 -0.072 0.66

EFA 0.568 0.444 0.264 0.664 0.617 0.516 0.275 0.284 0.437 0.635 0.857 0.74 1 0.856 -0.245 -0.391 -0.396 -0.045 0.722

EEM 0.514 0.491 0.198 0.628 0.586 0.487 0.268 0.314 0.412 0.603 0.807 0.688 0.856 1 -0.118 -0.208 -0.205 0.11 0.776

SHY -0.127 0.002 -0.053 -0.178 -0.136 -0.141 -0.054 -0.11 -0.193 -0.229 -0.276 -0.271 -0.245 -0.118 1 0.821 0.668 0.668 -0.106

IEF -0.252 0.012 -0.147 -0.29 -0.218 -0.175 -0.092 -0.106 -0.21 -0.319 -0.392 -0.386 -0.391 -0.208 0.821 1 0.929 0.81 -0.194

TLT -0.246 0.021 -0.155 -0.31 -0.249 -0.159 -0.074 -0.082 -0.203 -0.32 -0.375 -0.365 -0.396 -0.205 0.668 0.929 1 0.814 -0.198

LQD 0.023 0.135 -0.08 -0.048 0.012 0.019 0.048 -0.052 -0.053 -0.089 -0.054 -0.072 -0.045 0.11 0.668 0.81 0.814 1 0.179

HYG 0.429 0.417 0.197 0.558 0.51 0.453 0.231 0.25 0.333 0.504 0.742 0.66 0.722 0.776 -0.106 -0.194 -0.198 0.179 1

x2 0.0000

IBM KO BMY ORCL MMM BAX BIG NFLX AKAM GE SPY IWM EFA EEM SHY IEF TLT LQD HYG

IBM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

KO 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

BMY 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

ORCL 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

MMM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

BAX 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

BIG 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

NFLX 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

AKAM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

GE 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

SPY 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

IWM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

EFA 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

EEM 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

SHY 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

IEF 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

TLT 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

LQD 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

HYG 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

Stock Analysis: In this section, you will select five stocks from the provided list and determine their values by applying an appropriate valuation model from the following options: price to multiple model (earning or sales), dividend valuation model, or free cash flow model. A. Determine the value of each stock by using an appropriate model based on the characteristics provided for each stock; use each model at least once. B. Provide a rationale for the stock valuation method you chose for each stock. Cite specific information to support your decisions. C. Using the calculated valuation, the current market price, and historical performance, determine the expected return for each stock.Portfolio Development: In this section, you will develop a portfolio for both clients based on their risk tolerance, return objectives, and liquidity objectives. You will select appropriate assets from the provided list. A. For each client, develop a portfolio from the list of assets provided that is informed by your analysis of each clients objectives and (if applicable) the stock valuation you determined. B. For each portfolio, calculate the expected portfolio return using the CAPM (beta) model. C. For each portfolio, calculate the expected portfolio standard deviation.

Instructions:

1. Insert portfolio weights in the yellow highlighted area.

2. Portfolio Standard Deviation is calculated below in grey below.

Standard Deviation Portfolio Weight

IBM 20.0% 0%

KO 13.0% 0%

BMY 28.0% 0%

ORCL 16.0% 0%

MMM 14.0% 0%

BAX 16.0% 0%

BIG 32.0% 0%

NFLX 45.0% 0%

AKAM 37.0% 0%

GE 16.0% 0%

SPY 11.0% 0%

IWM 18.0% 0%

EFA 15.0% 0%

EEM 19.0% 0%

SHY 1.0% 0%

IEF 6.0% 0%

TLT 13.5% 0%

LQD 6.0% 0%

HYG 8.0% 0%

0%

Portfolio Standard Deviation 0.00%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

Step: 3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Financial Management

Authors: Eugene F. Brigham, Phillip R. Daves

13th Edition

1337395080, 9781337395083

More Books

Students also viewed these Finance questions

Question

★★★★★

During 2012, Kim and Silverman Electronics recorded credit sales of $640,000. Based on prior experience, it estimates a 3.5 percent bad debt rate on credit sales. Required: 1. Prepare journal entries...

Answered: 1 week ago

Question

★★★★★

In a recent issue of the Wall Street Journal (or on www.wsj.com), locate the yields on government bonds for various countries. Find a country whose 10-year government bond yield was above that on the...

Answered: 1 week ago

Question

★★★★★

4. Greet students at the door to the class every day.

Answered: 1 week ago

Question

★★★★★

For its most recent fiscal year, Carmichael Hobby Shop recorded EBITDA of $512,725.20, EBIT of $362,450.20, zero interest expense, and cash flow to investors from operating activity of $348,461.25....

Answered: 1 week ago

Question

★★★★★

Lippborg Inc. had the following transactions during the current fiscal year ending 31 December 2020 1. Aug They borrowed $65.000 from Heaven Bank, signing a 3- months, 7,5% Note Payable 15. Oct...

Answered: 1 week ago

Question

★★★★★

PR 19-2A Entries and schedules for unfinished jobs and completed jobs OBJ.2 Tybee Industries Inc. uses a job order cost system. The following data summarize the operations related to production for...

Answered: 1 week ago

Question

★★★★★

Also, What is the domain of f? and what is the domain of f-1? Consider the graph of the one-to-one function shown in the figure below. y 10+ 00 8 6 4 2 Sketch the graph of f-1. -10 5 2 4 y 10 5 5 10...

Answered: 1 week ago

Question

★★★★★

Drew Company produces two products: a high end laptop computer under the label Bunsen Laptops, and an inexpensive desktop computer under the label Beaker Computers. The two products use two overhead...

Answered: 1 week ago

Question

★★★★★

Answer the following grade 12 physics questions.1. An archer shoots an arrow at 120 m/s at an angle of 45.0 above the horizontal. Which statement is correct?- The magnitude of the vertical component...

Answered: 1 week ago

Question

★★★★★

A horizontal beam of length L is supported at each end (x = 0 and x = L), as shown below. Suppose an external vertical force F is applied to the beam at location a, where a is measured from the left...

Answered: 1 week ago

Question

★★★★★

2. Select a major decision of a company/organization you have worked for (e.g., new process, new product, new facility, etc) or research a major private decision (e.g., Deep Water Horizon, iPhone,...

Answered: 1 week ago

Question

★★★★★

Based on the hotels stated strategy, list at least four more important employee behaviors important for the Hotel Pariss staff to exhibit.

Answered: 1 week ago

Question

★★★★★

Based on what we discussed in Chapter 5, what advice would you give Gawker regarding how to improve its personnel planning?

Answered: 1 week ago

Question

★★★★★

MyManagementLab onlycomprehensive writing assignment for this chapter.

Answered: 1 week ago

Previous Question Next Question

Correlation Matrix
Security	IBM	KO	BMY	ORCL	MMM	BAX	BIG	NFLX	AKAM	GE	SPY	IWM	EFA	EEM	SHY	IEF	TLT	LQD	HYG
IBM	1	0.289	0.185	0.589	0.524	0.368	0.215	0.179	0.255	0.539	0.622	0.539	0.568	0.514	-0.127	-0.252	-0.246	0.023	0.429
KO	0.289	1	0.162	0.316	0.447	0.283	0.184	0.187	0.194	0.393	0.52	0.359	0.444	0.491	0.002	0.012	0.021	0.135	0.417
BMY	0.185	0.162	1	0.262	0.242	0.247	0.155	0.143	0.117	0.283	0.348	0.313	0.264	0.198	-0.053	-0.147	-0.155	-0.08	0.197
ORCL	0.589	0.316	0.262	1	0.535	0.432	0.249	0.311	0.404	0.5	0.739	0.636	0.664	0.628	-0.178	-0.29	-0.31	-0.048	0.558
MMM	0.524	0.447	0.242	0.535	1	0.425	0.231	0.135	0.228	0.672	0.703	0.585	0.617	0.586	-0.136	-0.218	-0.249	0.012	0.51
BAX	0.368	0.283	0.247	0.432	0.425	1	0.086	0.265	0.257	0.415	0.569	0.476	0.516	0.487	-0.141	-0.175	-0.159	0.019	0.453
BIG	0.215	0.184	0.155	0.249	0.231	0.086	1	0.092	0.187	0.259	0.376	0.483	0.275	0.268	-0.054	-0.092	-0.074	0.048	0.231
NFLX	0.179	0.187	0.143	0.311	0.135	0.265	0.092	1	0.225	0.254	0.372	0.317	0.284	0.314	-0.11	-0.106	-0.082	-0.052	0.25
AKAM	0.255	0.194	0.117	0.404	0.228	0.257	0.187	0.225	1	0.372	0.479	0.417	0.437	0.412	-0.193	-0.21	-0.203	-0.053	0.333
GE	0.539	0.393	0.283	0.5	0.672	0.415	0.259	0.254	0.372	1	0.744	0.651	0.635	0.603	-0.229	-0.319	-0.32	-0.089	0.504
SPY	0.622	0.52	0.348	0.739	0.703	0.569	0.376	0.372	0.479	0.744	1	0.877	0.857	0.807	-0.276	-0.392	-0.375	-0.054	0.742
IWM	0.539	0.359	0.313	0.636	0.585	0.476	0.483	0.317	0.417	0.651	0.877	1	0.74	0.688	-0.271	-0.386	-0.365	-0.072	0.66
EFA	0.568	0.444	0.264	0.664	0.617	0.516	0.275	0.284	0.437	0.635	0.857	0.74	1	0.856	-0.245	-0.391	-0.396	-0.045	0.722
EEM	0.514	0.491	0.198	0.628	0.586	0.487	0.268	0.314	0.412	0.603	0.807	0.688	0.856	1	-0.118	-0.208	-0.205	0.11	0.776
SHY	-0.127	0.002	-0.053	-0.178	-0.136	-0.141	-0.054	-0.11	-0.193	-0.229	-0.276	-0.271	-0.245	-0.118	1	0.821	0.668	0.668	-0.106
IEF	-0.252	0.012	-0.147	-0.29	-0.218	-0.175	-0.092	-0.106	-0.21	-0.319	-0.392	-0.386	-0.391	-0.208	0.821	1	0.929	0.81	-0.194
TLT	-0.246	0.021	-0.155	-0.31	-0.249	-0.159	-0.074	-0.082	-0.203	-0.32	-0.375	-0.365	-0.396	-0.205	0.668	0.929	1	0.814	-0.198
LQD	0.023	0.135	-0.08	-0.048	0.012	0.019	0.048	-0.052	-0.053	-0.089	-0.054	-0.072	-0.045	0.11	0.668	0.81	0.814	1	0.179
HYG	0.429	0.417	0.197	0.558	0.51	0.453	0.231	0.25	0.333	0.504	0.742	0.66	0.722	0.776	-0.106	-0.194	-0.198	0.179	1


x2	0.0000
	IBM	KO	BMY	ORCL	MMM	BAX	BIG	NFLX	AKAM	GE	SPY	IWM	EFA	EEM	SHY	IEF	TLT	LQD	HYG
IBM	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
KO	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
BMY	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
ORCL	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
MMM	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
BAX	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
BIG	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
NFLX	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
AKAM	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
GE	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
SPY	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
IWM	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
EFA	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
EEM	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
SHY	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
IEF	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
TLT	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
LQD	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000
HYG	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000

Instructions:
1. Insert portfolio weights in the yellow highlighted area.
2. Portfolio Standard Deviation is calculated below in grey below.

	Standard Deviation	Portfolio Weight
IBM	20.0%	0%
KO	13.0%	0%
BMY	28.0%	0%
ORCL	16.0%	0%
MMM	14.0%	0%
BAX	16.0%	0%
BIG	32.0%	0%
NFLX	45.0%	0%
AKAM	37.0%	0%
GE	16.0%	0%
SPY	11.0%	0%
IWM	18.0%	0%
EFA	15.0%	0%
EEM	19.0%	0%
SHY	1.0%	0%
IEF	6.0%	0%
TLT	13.5%	0%
LQD	6.0%	0%
HYG	8.0%	0%
		0%

Portfolio Standard Deviation	0.00%