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The table below presents historical data of Reynolds, AmFoam, and Market Index. Reynolds AmFoam Market Index Historical Data (Price Including Dividends) ($) (Price Including Dividends)

  1. The table below presents historical data of Reynolds, AmFoam, and Market Index.

Reynolds

AmFoam

Market Index

Historical Data

(Price Including Dividends)

($)

(Price Including Dividends)

($)

(Including Dividends)

2015

18.4

48.75

11,663.98

2016

15.81

52.3

8,785.70

2017

17.5

48.75

8,679.98

2018

10.7

53.27

6,434.03

2019

12.27

60

5,602.28

2020

8.00

58.75

4,705.97

  1. Calculate annual returns for Reynolds, AmFoam, and Market Index using the following method:

Return = (Pricet Pricet-1 )/ Pricet-1

where t is year.

Report the annual returns of Reynolds, AmFoam, and Market Index. (Remember that you cannot calculate the annual return of the year 2015 because you do not have 2014 price data. Leave the year 2015 return blank.)

  1. Compute the expected returns and risks of Reynolds, AmFoam, and Market Index (Recall that the data are historical returns data. Use the appropriate techniques to compute the expected returns and risks for historical returns data.)

  1. Estimate Reynolds and AmFoams betas as the slope of a regression with stock return on the y- axis and market return on the x-axis. Use Excels REGRESSION function. On the REGRESSION function window, input the data accordingly. Describe fully the meaning of Reynolds and AmFoams betas.

  1. The risk free rate on 10 year Treasury notes is 1.77%. Assume that the market risk premium is 8%. What are Reynolds and Amfoams required returns?

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