Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed

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. 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The New Public Finance

Authors: Inge Kaul, Pedro Condeicao

1st Edition

0195179978, 978-0195179972

More Books

Students also viewed these Finance questions