Download monthly adjusted close price for Johnson and Johnson (JNJ) from Feb 2011 to Feb 2021 (this should give you values for 121 months, which can be used to calculate returns for 120 months) (you need to use the Adjusted Close price. One of the quirks of data from Yahoo Finance is that when you download monthly data, you will see the date as the first day of the month, but the data is actually from the last day of the month. You can change the date to the last day of the month once the data is in Excel.). Use index return on the S&P 500 (^GSPC on Yahoo finance) as the proxy for the market return. Assume risk-free rate to be 2.0% per year. ( Steps to get data: i) Go to Yahoo Finance and type in JNJ in the Quote Lookup box (you can also put Johnson and Johnson instead of JNJ), ii) Click on the Historical Data tab, iii) Change period from 1/1/ 2011 to Present, use Historical Prices for Show and change Frequency to Monthly, iv) Click on download data, v) Sort data by date once data is in Excel. )

a. Data download.

b. Calculate returns for both JNJ and S&P 500 for 120 months ending in Feb 2021. To calculate returns for 120 months, prices of 121 months would be required. Cannot calculate the returns for the first value.

c. What is the compound annual return over the 10 years for both JNJ and S&P 500?

d. What is the variance of returns of the S&P 500 and covariance between the returns of S&P500 and the returns of JNJ? Use 10 years of monthly returns ending with the returns of Feb 2021 for this.

e. What is the beta of JNJ with respect to the S&P 500? Use the Capital Asset Pricing Model to calculate the cost of equity for Johnson and Johnson (JNJ). Use 10 years of monthly returns ending with the returns of Feb 2021 for this.

f. Use cost of equity from part (e) and dividend growth rate from question 1(c) to calculate the price of JNJ at the end of Feb 2021 using the Gordon growth model.