The excel file 'Question 2_Stock Prices CW 2022' contains the monthly stock prices for Amazon (the technology company) as well as the value of the S\&P 500 index over the period 30/05/1997 to 30/09/2019. Excel functions STDEV, VAR, COVAR, and CORREL are especially useful for answering the questions below. a) Calculate the monthly returns for the S\&P 500 index and for Amazon. Find the beta for Amazon. Interpret the value that you have found for Amazon's beta. b) Forecast the expected return for Amazon using the CAPM model and assuming that the return on the market is 15% and the risk-free rate is 1.5%. c) Suppose that you can borrow or lend at 1.5%, which is the risk-free rate. Would you invest in: 1. Some combination of your stock (Amazon) and the market (S\&P 500) 2. Some combination of the market (S\&P 500 index) and borrowing or lending at the risk-free rate? Please explain. \begin{tabular}{|l|l|r|l|l|l|} \hline & \multicolumn{1}{|l|}{ A } & \multicolumn{1}{|l|}{ Amazon } & \multicolumn{1}{l|}{ Amazon } & \multicolumn{1}{l|}{ S\&P 500} & \multicolumn{1}{l|}{ S\&P 500} \\ \hline 1 & Month & Share Price & Returns & \multicolumn{1}{l|}{ Index } & \multicolumn{1}{l|}{ Returns } \\ \hline 237 & 30/12/2016 & 749.8701 & 0.000933 & 2238.83 & 0.018201 \\ \hline 238 & 31/01/2017 & 823.48 & 0.098164 & 2278.87 & 0.017884 \\ \hline 239 & 28/02/2017 & 845.04 & 0.026182 & 2363.64 & 0.037198 \\ \hline 240 & 31/03/2017 & 886.54 & 0.04911 & 2362.72 & 0.000389 \\ \hline 241 & 28/04/2017 & 924.99 & 0.043371 & 2384.2 & 0.009091 \\ \hline 242 & 31/05/2017 & 994.6201 & 0.075277 & 2411.8 & 0.011576 \\ \hline 243 & 30/06/2017 & 968 & 0.026764 & 2423.41 & 0.004814 \\ \hline 244 & 31/07/2017 & 987.78 & 0.020434 & 2470.3 & 0.019349 \\ \hline 245 & 31/08/2017 & 980.6001 & 0.007269 & 2471.65 & 0.000546 \\ \hline 246 & 29/09/2017 & 961.3501 & 0.019631 & 2519.36 & 0.019303 \\ \hline 247 & 31/10/2017 & 1105.28 & 0.149716 & 2575.26 & 0.022188 \\ \hline 248 & 30/11/2017 & 1176.75 & 0.064662 & 2647.58 & 0.028083 \\ \hline 249 & 29/12/2017 & 1169.47 & 0.006187 & 2673.61 & 0.009832 \\ \hline 250 & 31/01/2018 & 1450.89 & 0.240639 & 2823.81 & 0.056179 \\ \hline 251 & 28/02/2018 & 1512.45 & 0.042429 & 2713.83 & 0.038947 \\ \hline 252 & 30/03/2018 & 1447.34 & 0.043049 & 2640.87 & 0.026885 \\ \hline 253 & 30/04/2018 & 1566.13 & 0.082075 & 2648.05 & 0.002719 \\ \hline 254 & 31/05/2018 & 1629.62 & 0.040539 & 2705.27 & 0.021608 \\ \hline 255 & 29/06/2018 & 1699.8 & 0.043065 & 2718.37 & 0.004842 \\ \hline 256 & 31/07/2018 & 1777.44 & 0.045676 & 2816.29 & 0.036022 \\ \hline 257 & 31/08/2018 & 2012.71 & 0.132365 & 2901.52 & 0.030263 \\ \hline 258 & 28/09/2018 & 2003 & 0.004824 & 2913.98 & 0.004294 \\ \hline 259 & 31/10/2018 & 1598.01 & 0.202192 & 2711.74 & 0.069403 \\ \hline 260 & 30/11/2018 & 1690.17 & 0.057672 & 2760.17 & 0.017859 \\ \hline 261 & 31/12/2018 & 1501.97 & 0.11135 & 2506.85 & 0.091777 \\ \hline 262 & 31/01/2019 & 1718.73 & 0.144317 & 2704.1 & 0.078684 \\ \hline 263 & 28/02/2019 & 1639.83 & 0.045906 & 2784.49 & 0.029729 \\ \hline 264 & 29/03/2019 & 1780.75 & 0.085936 & 2834.4 & 0.017924 \\ \hline 265 & 30/04/2019 & 1926.52 & 0.081859 \end{tabular} The excel file 'Question 2_Stock Prices CW 2022' contains the monthly stock prices for Amazon (the technology company) as well as the value of the S\&P 500 index over the period 30/05/1997 to 30/09/2019. Excel functions STDEV, VAR, COVAR, and CORREL are especially useful for answering the questions below. a) Calculate the monthly returns for the S\&P 500 index and for Amazon. Find the beta for Amazon. Interpret the value that you have found for Amazon's beta. b) Forecast the expected return for Amazon using the CAPM model and assuming that the return on the market is 15% and the risk-free rate is 1.5%. c) Suppose that you can borrow or lend at 1.5%, which is the risk-free rate. Would you invest in: 1. Some combination of your stock (Amazon) and the market (S\&P 500) 2. Some combination of the market (S\&P 500 index) and borrowing or lending at the risk-free rate? Please explain. \begin{tabular}{|l|l|r|l|l|l|} \hline & \multicolumn{1}{|l|}{ A } & \multicolumn{1}{|l|}{ Amazon } & \multicolumn{1}{l|}{ Amazon } & \multicolumn{1}{l|}{ S\&P 500} & \multicolumn{1}{l|}{ S\&P 500} \\ \hline 1 & Month & Share Price & Returns & \multicolumn{1}{l|}{ Index } & \multicolumn{1}{l|}{ Returns } \\ \hline 237 & 30/12/2016 & 749.8701 & 0.000933 & 2238.83 & 0.018201 \\ \hline 238 & 31/01/2017 & 823.48 & 0.098164 & 2278.87 & 0.017884 \\ \hline 239 & 28/02/2017 & 845.04 & 0.026182 & 2363.64 & 0.037198 \\ \hline 240 & 31/03/2017 & 886.54 & 0.04911 & 2362.72 & 0.000389 \\ \hline 241 & 28/04/2017 & 924.99 & 0.043371 & 2384.2 & 0.009091 \\ \hline 242 & 31/05/2017 & 994.6201 & 0.075277 & 2411.8 & 0.011576 \\ \hline 243 & 30/06/2017 & 968 & 0.026764 & 2423.41 & 0.004814 \\ \hline 244 & 31/07/2017 & 987.78 & 0.020434 & 2470.3 & 0.019349 \\ \hline 245 & 31/08/2017 & 980.6001 & 0.007269 & 2471.65 & 0.000546 \\ \hline 246 & 29/09/2017 & 961.3501 & 0.019631 & 2519.36 & 0.019303 \\ \hline 247 & 31/10/2017 & 1105.28 & 0.149716 & 2575.26 & 0.022188 \\ \hline 248 & 30/11/2017 & 1176.75 & 0.064662 & 2647.58 & 0.028083 \\ \hline 249 & 29/12/2017 & 1169.47 & 0.006187 & 2673.61 & 0.009832 \\ \hline 250 & 31/01/2018 & 1450.89 & 0.240639 & 2823.81 & 0.056179 \\ \hline 251 & 28/02/2018 & 1512.45 & 0.042429 & 2713.83 & 0.038947 \\ \hline 252 & 30/03/2018 & 1447.34 & 0.043049 & 2640.87 & 0.026885 \\ \hline 253 & 30/04/2018 & 1566.13 & 0.082075 & 2648.05 & 0.002719 \\ \hline 254 & 31/05/2018 & 1629.62 & 0.040539 & 2705.27 & 0.021608 \\ \hline 255 & 29/06/2018 & 1699.8 & 0.043065 & 2718.37 & 0.004842 \\ \hline 256 & 31/07/2018 & 1777.44 & 0.045676 & 2816.29 & 0.036022 \\ \hline 257 & 31/08/2018 & 2012.71 & 0.132365 & 2901.52 & 0.030263 \\ \hline 258 & 28/09/2018 & 2003 & 0.004824 & 2913.98 & 0.004294 \\ \hline 259 & 31/10/2018 & 1598.01 & 0.202192 & 2711.74 & 0.069403 \\ \hline 260 & 30/11/2018 & 1690.17 & 0.057672 & 2760.17 & 0.017859 \\ \hline 261 & 31/12/2018 & 1501.97 & 0.11135 & 2506.85 & 0.091777 \\ \hline 262 & 31/01/2019 & 1718.73 & 0.144317 & 2704.1 & 0.078684 \\ \hline 263 & 28/02/2019 & 1639.83 & 0.045906 & 2784.49 & 0.029729 \\ \hline 264 & 29/03/2019 & 1780.75 & 0.085936 & 2834.4 & 0.017924 \\ \hline 265 & 30/04/2019 & 1926.52 & 0.081859 \end{tabular}