please help me answer question by excel

1. Each team member will pick a company to analyze. That way, teams with 5 members will be working with portfolios of 5 different stocks, and teams with 4 members with portfolios of 4 different stocks. Each company should be publicly traded and with at least eight years of trading history. Collect price information for each stock and the S&P 500 index from Yahoo! Finance (http://finance.yahoo.com) as follows: ? Enter the stock/index symbol. On the page for that stock/index, click "Historical Prices" on the left side of the page. ? Enter the "start date" as September 30, 2009 and the "end date" as September 30, 2017 to cover the eight-year period. Make sure you click "monthly" next to the date. ? After hitting "Get Prices," scroll to the bottom of the first page and click "Download to Spreadsheet." If you are asked if you want to open or save the file, click open. ? Copy the entire spreadsheet, open Excel, and paste the Web data into a spreadsheet. Delete all the columns except the date and the adjusted close (the first and last columns). Convert these prices to monthly returns as the percentage change in the monthly prices. 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. (Note: we showed how to compute returns with stock price and dividend data. The "adjusted close" series from Yahoo! Finance is already adjusted for dividends, so you may compute returns based on the percentage change in monthly adjusted prices.) Compute the mean monthly return (=AVERAGE), variance (=VAR), and standard deviation (=STDEV) for the monthly returns of each of the stocks. Convert the monthly statistics to annual statistics for easier interpretation (multiply the mean monthly return and variance by 12, and multiply the monthly standard deviation by the square root (=SQRT) of 12). Add a column in your Excel worksheet with the average return across stocks for each month. This is the monthly return to an equally weighted portfolio of the 5 (or 4, if the group has 4 members) stocks. Compute the mean, variance, and standard deviation of monthly returns for the equally weighted portfolio. Double check that the average return on this equally weighted portfolio is equal to the average return of all of the individual stocks. Convert these monthly statistics to annual statistics (as described above) for easier interpretation. BUS1 173A - Financial Management: Theory and Policy Page 2 of 3 2. Using the annual statistics, do on Excel plot with standard deviation (volatility) on the x-axis and average return on the y-axis as follows: ? Create three columns on your spreadsheet with the statistics you created for each of the individual stocks and the equally weighted portfolio. The first column will have the ticker, the second will have annual standard deviation, and the third will have the annual mean return. ? Highlight the data in the last two columns (standard deviation and mean), choose>Insert>Chart>XY Scatter Plot. Complete the chart wizard to finish the plot. Label your chart ("Risk-Return Trade-Off"), axes, and data (choose from "Add Chart Elements"). What do you notice about the volatilities of the individual stocks, compared to the volatility of the equally weighted portfolio? 3. Beta estimation Define beta coefficient. Explain the CAPM model. What is the security market line? Use both the SLOPE function and the formula1 to estimate the beta coefficient of each stock2 . Use the S&P 500 index (prices downloaded in 1.) as an approximation of the market portfolio. Plot the characteristic line for one of your stocks (similar to what you did in 2.). Explain the plot. Estimate the beta of the equally weighted portfolio. 4. What is the efficient frontier? How does the correlation between two stocks affect the risk and return of portfolios that combine them? Use the Solver3 function in Excel to find the optimum portfolio weights and efficient frontier as follows: Begin with your equally weighted portfolio analyzed above. Establish the portfolio returns for the stocks in the portfolio using a formula that depends on the portfolio weights. Initially, these 1 jQuery200024801637705477342_1507060789756?????? = ????????????(???????? ,????????) ???????? 2 = ????????????????????????????????????????????(???????? ,????????)???????? ???????? 2 The Tool Kit excel file on Canvas has details on beta estimation in Excel. 3 If the Solver tool is not available, you must load it into Excel as follows: 1. On the File Tab, click Excel Options. 2. Click Add-Ins, and then, in the Manage box, select Excel Add-ins. 3. Click Go. 4. In the Add-Ins available box, select the Solver Add-in check box, and then click OK. Tip: If Solver Add-in is not listed in the Add-Ins available box, click Browse to locate the add-in. If you are prompted that the Solver Add-in is not currently installed on your computer, click Yes to install it. 5. After you load the Solver Add-in, the Solver command is available in the Analysis group on the Data tab. BUS1 173A - Financial Management: Theory and Policy Page 3 of 3 weights will all equal 1/5 (or , if the group has 4 members). You would like to allow the portfolio weights to vary, so you will need to list the weights for each stock in separate cells and establish another cell that sums the weights of the stocks. The portfolio returns for each month must reference these weights for Excel Solver to be useful. Compute the values for the monthly mean return and standard deviation of the portfolio. Convert these values to annual numbers (as you did above) for easier interpretation. Compute the efficient frontier. Use the Solver tool in Excel (on the Data tab in the analysis section). To set the Solver parameters: ? Set the target cell as the cell of interest, making it the cell that computes the (annual) portfolio standard deviation. Minimize this value. ? Establish the "By Changing Cells" by holding the Control key and clicking in each of the 5 (or 4, if the group has 4 members) cells containing the weights of each stock. ? Add constraints by clicking the Add button next to the "Subject to the Constraints" box. One set of constraints will be the weight of each stock that is greater than or equal to zero. Calculate the constraints individually. A second constraint is that the weights will sum to one. ? Compute the portfolio with the lowest standard deviation. If the parameters are set correctly, you should get a solution when you click "Solve." If there is an error, you will need to double-check the parameters, especially the constraints. Next, compute portfolios that have the lowest standard deviation for a target level of the expected return. ? Start by finding the portfolio with an expected return 2%higher than that of the minimum variance portfolio. To do this, add a constraint that the (annual) portfolio return equals this target level. Click "Solve" and record the standard deviation and mean return of the solution (and be sure the mean return equals target?if not, check your constraint). ? Repeat the above step raising the target return in 2% increments, recording the result for each step. Continue to increase the target return and record the result until Solver can no longer finding solution. ? Plot the efficient frontier. To do this, create an XY Scatter Plot (similar to what you did in 2.), with portfolio standard deviation on the x-axis and the return on the y-axis, using the data for the minimum variance portfolio and the portfolios you computed in the previous step. How do these portfolios compare to the mean and standard deviation for the equally weight portfolio analyzed in 2? Explain your plot. 5. Prepare a column chart showing the 8-year performance of each of your 5 (or 4, if the group has 4 members) companies, the equally-weighted portfolio, and the optimal portfolio. The chart should show the current dollar value (future value) of $10,000 invested 8 years ago, assuming all distributions were reinvested.

BUS1 173A - Financial Management: Theory and Policy PROJECT #1 (60 points) Due: Thursday, October 19th, 2017 Create a separate excel sheet for each problem. 1. Each team member will pick a company to analyze. That way, teams with 5 members will be working with portfolios of 5 different stocks, and teams with 4 members with portfolios of 4 different stocks. Each company should be publicly traded and with at least eight years of trading history. Collect price information for each stock and the S&P 500 index from Yahoo! Finance (http://finance.yahoo.com) as follows: Enter the stock/index symbol. On the page for that stock/index, click \"Historical Prices\" on the left side of the page. Enter the \"start date\" as September 30, 2009 and the \"end date\" as September 30, 2017 to cover the eight-year period. Make sure you click \"monthly\" next to the date. After hitting \"Get Prices,\" scroll to the bottom of the first page and click \"Download to Spreadsheet.\" If you are asked if you want to open or save the file, click open. Copy the entire spreadsheet, open Excel, and paste the Web data into a spreadsheet. Delete all the columns except the date and the adjusted close (the first and last columns). Convert these prices to monthly returns as the percentage change in the monthly prices. 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. (Note: we showed how to compute returns with stock price and dividend data. The \"adjusted close\" series from Yahoo! Finance is already adjusted for dividends, so you may compute returns based on the percentage change in monthly adjusted prices.) Compute the mean monthly return (=AVERAGE), variance (=VAR), and standard deviation (=STDEV) for the monthly returns of each of the stocks. Convert the monthly statistics to annual statistics for easier interpretation (multiply the mean monthly return and variance by 12, and multiply the monthly standard deviation by the square root (=SQRT) of 12). Add a column in your Excel worksheet with the average return across stocks for each month. This is the monthly return to an equally weighted portfolio of the 5 (or 4, if the group has 4 members) stocks. Compute the mean, variance, and standard deviation of monthly returns for the equally weighted portfolio. Double check that the average return on this equally weighted portfolio is equal to the average return of all of the individual stocks. Convert these monthly statistics to annual statistics (as described above) for easier interpretation. Page 1 of 3 BUS1 173A - Financial Management: Theory and Policy 2. Using the annual statistics, create an Excel plot with standard deviation (volatility) on the x-axis and average return on the y-axis as follows: Create three columns on your spreadsheet with the statistics you created for each of the individual stocks and the equally weighted portfolio. The first column will have the ticker, the second will have annual standard deviation, and the third will have the annual mean return. Highlight the data in the last two columns (standard deviation and mean), choose>Insert>Chart>XY Scatter Plot. Complete the chart wizard to finish the plot. Label your chart (\"Risk-Return Trade-Off\"), axes, and data (choose from \"Add Chart Elements\"). What do you notice about the volatilities of the individual stocks, compared to the volatility of the equally weighted portfolio? 3. Beta estimation Define beta coefficient. Explain the CAPM model. What is the security market line? Use both the SLOPE function and the formula1 to estimate the beta coefficient of each stock2. Use the S&P 500 index (prices downloaded in 1.) as an approximation of the market portfolio. Plot the characteristic line for one of your stocks (similar to what you did in 2.). Explain the plot. Estimate the beta of the equally weighted portfolio. 4. What is the efficient frontier? How does the correlation between two stocks affect the risk and return of portfolios that combine them? Use the Solver3 function in Excel to find the optimum portfolio weights and efficient frontier as follows: Begin with your equally weighted portfolio analyzed above. Establish the portfolio returns for the stocks in the portfolio using a formula that depends on the portfolio weights. Initially, these 1 2 = ( , ) 2 = ( , ) The Tool Kit excel file on Canvas has details on beta estimation in Excel. 3 If the Solver tool is not available, you must load it into Excel as follows: 1. On the File Tab, click Excel Options. 2. Click Add-Ins, and then, in the Manage box, select Excel Add-ins. 3. Click Go. 4. In the Add-Ins available box, select the Solver Add-in check box, and then click OK. Tip: If Solver Add-in is not listed in the Add-Ins available box, click Browse to locate the add-in. If you are prompted that the Solver Add-in is not currently installed on your computer, click Yes to install it. 5. After you load the Solver Add-in, the Solver command is available in the Analysis group on the Data tab. Page 2 of 3 BUS1 173A - Financial Management: Theory and Policy weights will all equal 1/5 (or , if the group has 4 members). You would like to allow the portfolio weights to vary, so you will need to list the weights for each stock in separate cells and establish another cell that sums the weights of the stocks. The portfolio returns for each month must reference these weights for Excel Solver to be useful. Compute the values for the monthly mean return and standard deviation of the portfolio. Convert these values to annual numbers (as you did above) for easier interpretation. Compute the efficient frontier. Use the Solver tool in Excel (on the Data tab in the analysis section). To set the Solver parameters: Set the target cell as the cell of interest, making it the cell that computes the (annual) portfolio standard deviation. Minimize this value. Establish the \"By Changing Cells\" by holding the Control key and clicking in each of the 5 (or 4, if the group has 4 members) cells containing the weights of each stock. Add constraints by clicking the Add button next to the \"Subject to the Constraints\" box. One set of constraints will be the weight of each stock that is greater than or equal to zero. Calculate the constraints individually. A second constraint is that the weights will sum to one. Compute the portfolio with the lowest standard deviation. If the parameters are set correctly, you should get a solution when you click \"Solve.\" If there is an error, you will need to double-check the parameters, especially the constraints. Next, compute portfolios that have the lowest standard deviation for a target level of the expected return. Start by finding the portfolio with an expected return 2% higher than that of the minimum variance portfolio. To do this, add a constraint that the (annual) portfolio return equals this target level. Click \"Solve\" and record the standard deviation and mean return of the solution (and be sure the mean return equals targetif not, check your constraint). Repeat the above step raising the target return in 2% increments, recording the result for each step. Continue to increase the target return and record the result until Solver can no longer find a solution. Plot the efficient frontier. To do this, create an XY Scatter Plot (similar to what you did in 2.), with portfolio standard deviation on the x-axis and the return on the y-axis, using the data for the minimum variance portfolio and the portfolios you computed in the previous step. How do these portfolios compare to the mean and standard deviation for the equally weighted portfolio analyzed in 2? Explain your plot. 5. Prepare a column chart showing the 8-year performance of each of your 5 (or 4, if the group has 4 members) companies, the equally-weighted portfolio, and the optimal portfolio. The chart should show the current dollar value (future value) of $10,000 invested 8 years ago, assuming all distributions were reinvested. Page 3 of 3