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2. You are trying to determine the performance of Spark, Ryman Health, and Mainfreight, using the NZX50 as a proxy for the market, and NZ 30 day treasury bill rates as a proxy for the risk-free rate. Data are available in the attached spreadsheet. (a) Given that interest is taxed in New Zealand, whereas dividends and capital gains are not, adjust the treasury bill rates to calculate the return you would receive after-tax in each month. You may assume that the tax rate faced by investors is 33%, and that 30 days represents one twelfth of a year (the bills are quoted with 30 day compounding). (b) Now calculate the excess returns for each company and the NZX50. The data provided are total return indices, which incorporate dividends (i.e. you can ignore dividends). (c) For the entire period, estimate the alpha and beta of each firm. (d) What is the variance-covariance matrix for the three firms' returns? (e) If you allocated your wealth equally between the three firms, what would your portfolio's volatility be? 1 Name NEW ZEAL SPARK NE MAINFREIC RYMAN HE S\&P/NZX 50 -TOT RETURN IND 2 2. You are trying to determine the performance of Spark, Ryman Health, and Mainfreight, using the NZX50 as a proxy for the market, and NZ 30 day treasury bill rates as a proxy for the risk-free rate. Data are available in the attached spreadsheet. (a) Given that interest is taxed in New Zealand, whereas dividends and capital gains are not, adjust the treasury bill rates to calculate the return you would receive after-tax in each month. You may assume that the tax rate faced by investors is 33%, and that 30 days represents one twelfth of a year (the bills are quoted with 30 day compounding). (b) Now calculate the excess returns for each company and the NZX50. The data provided are total return indices, which incorporate dividends (i.e. you can ignore dividends). (c) For the entire period, estimate the alpha and beta of each firm. (d) What is the variance-covariance matrix for the three firms' returns? (e) If you allocated your wealth equally between the three firms, what would your portfolio's volatility be? 1 Name NEW ZEAL SPARK NE MAINFREIC RYMAN HE S\&P/NZX 50 -TOT RETURN IND 2