a. Calculate the long-term volatility estimate for each of the three companies.

 

LTV T+1 T+2 T+3 T+4 T+5 Dates T+1 T+2 T+3 T+4 T+5 PEP PEP KDP KDP KO PORT 0.01266744 0.01154707 0.01437127 0.01045763 0.01653961 0.01260637 0.01141208 0.0143771 0.01040199 0.01656487 0.01254796 0.01127897 0.01438289 0.01035147 0.01658984 0.01249211 0.01114772 0.01438864 0.01030561 0.01661452 0.01243871 0.01101831 0.01439436 0.010264 0.01663892 KO SP500 Portfolio SP500 0.00016721 0.00018937 0.00018395 0.00011817 0.00020675 0.0001664 0.00018716 0.00018403 0.00011754 0.00020706 0.00016563 0.00018498 0.0001841 0.00011697 0.00020737 0.0001649 0.00018282 0.00018417 0.00011645 0.00020768 0.00016419 0.0001807 0.00018425 0.00011598 0.00020799