Exrel Activity Evaluating Risk and Return Bartman Industries's and Reynolds inc's stock prices and dividends, along with the Winslow 5000 Index, are shown here for the period 2015 -2020, The Winslow 5000 data are adjusted to include dividende. The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate caleulations, Use a minus sign to enter negative values, if any. X a. Use the data to calculate anousl rates of retum for Bartman, Reynolds, and the Winsiow 5000 Index, Then calculate each entity's average return over the 5 -year period. (Hint: Remember, retums 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 retum for 2015 because you do not have 2014 data.) Round your answers to two decimal places. b. Calculate the standard deviations of the retums for Bartman, Reynolds, and the Winslow 5000 , (Hint: Use the sample standard deviation formul Which corresponds to the STOEV.S function in Excel.) found your answers to two decimal places. c. Colculate the coefficients of variation for Bartman, Reynolds, and the Winslow 5000 , Round your answers to two decimal places d. Assume the nsk-free rate during this time was 4\$. Calculate the Sharpe ratios for Bartman, Reynolds, and the Index over this perfod using their average returns. Round your answers to four decimal places. e. Construct a batter diagram that shows Bartman's and Reynolds's returns on the vertical axis and the Winsiow 5000 Index's returns on the harizontal axis. Choose the correct graph. The correct graph is A. Stacis' Returns ve. Index' Returns B. Stocka' Returns vs. Index's Returns Stncks' Returns vs. Index's Returns f. Estimate Bartman's and Reynolds's betas by running regressions of their returns against the index's returns. Round your answers to four decimal. piaces. Bartman's betal Reynolds's beta: Are these betas consistent with your groph? These betas consistent with the scatter diagrams. 9. Asume that the risk-free rate on long-term Treasury bonds is 5.5%. Assume also that the average annual retum on the Winglow 5000 is not a good estimate of the market's required return-it is too high. So use 9% as the expected return on the market. Use the SML equation to calculate the two companies' required returns. Round your answers to two decimal places. Bartman's required return: Reynolds's required return: h. If you formed a portfolo that consisted of 50% Bartman and 50% Reynolds, what would the portfolio's beta and required retum be? Round your answer for the portfolio's beta to four decimal pUlces and for the portfolo's required return to two decimal places. Portiolio's beta: Portfolio's required return: 1. Suppose an investor wants to include Bartman Industries's stock in his portfolio, Stocks A, B, and C are currently in the portfolio, and their betas are 0.810,0.970, and 1,300, respectively, Calculate the new portolio's required return if it consists of 25% of Bartman, 15% of Stock A, 45% of Stock B. and 15% of Stock C. Round your answer to two decimal places
