Today is September $14,2024,$ and you have just started your new job with a financial planning firm. In

addition to studying for all your license exams, you have been asked to review a portion of a client$$s stock

portfolio to determine the risk$/$return profiles of $12$ stocks in the portfolio. Unfortunately, your small firm

cannot afford the expensive databases that would provide all this information with a few simple keystrokes,

but that$$s why they hired you. Specifically, you have been asked to determine the monthly average returns

and standard deviations for the $12$ stocks for the past five years. In the following question, you will be asked

to do more extensive analyses on these same stocks.

The stocks $($with their symbols in parentheses$)$ are:

Archer Daniels Midland $($ADM$)$

Boeing $($BA$)$

Caterpillar $($CAT$)$

Deere & Co$.($DE$)$

General Mills, Inc. $($GIS$)$

eBay $($EBAY$)$

Hershey $($HSY$)$

International Business Machines Corporation $($IBM$)$

JPMorgan Chase & Co$.($JPM$)$

Microsoft $($MSFT$)$

Procter and Gamble $($PG$)$

Walmart $($WMT$)$

$1.$ Collect price information for each stock from Yahoo! Finance $($finance$.$yahoo.com$)$ as follows:

a$.$ Enter the stock symbol. On the page for that stock, click $$Historical Prices$$ on the left side of

the page.

b$.$ Enter the $$start date$$ as May $1,2000$ and the $$end date$$ as May $31,2024$ to cover the

fourteen year period. Make sure you click $$monthly$$ next to the date; the closing prices

reported by Yahoo! will then be for the last day of each month.

c$.$ After hitting $$Get Prices,$$ scroll to the bottom of the first page and click $$Download to

Spreadsheet.$$ If you are asked if you want to open or save the file, click open.

d$.$ Copy the entire spreadsheet, open Excel, and paste the Web data into a spreadsheet. Delete all

the columns except the date and the adjusted close $($the first and last columns$).$

e$.$ Keep the Excel file open and go back to the Yahoo! Finance Web page and hit the back

button. If you are asked if you want to save the data, click no$.$

f$.$ When you return to the prices page, enter the next stock symbol and hit $$Get Prices$$ again.

Do not change the dates or frequency, but make sure you have the same dates for all the

stocks you will download. Again, click $$Download to Spreadsheet$$ and then open the file.

Copy the last column, $$Adj$.$ Close,$$ paste it into the Excel file and change $$Adj$.$ Close$$ to the

stock symbol. Make sure that the first and last prices are in the same rows as the first stock.

g$.$ Repeat these steps for the remaining $10$ stocks, pasting each closing price right next to the

other stocks, again making sure that the correct prices on the correct dates all appear on the

same rows.

$2.$ Convert these prices to monthly returns as the percentage change in the monthly prices. $($Hint: Create

a separate worksheet within the Excel file.$)$ Note that to compute a return for each month, you need a

beginning and ending price, so you will not be able to compute the return for the first month.

$3.$ Compute the mean monthly returns and standard deviations for the monthly returns of each of the

stocks.$*$ Convert the monthly statistics to annual statistics for easier interpretation $($multiply the mean

monthly return by $12,$ and multiply the monthly standard deviation by the square root of $12).$

$4.$ Add a column in your Excel worksheet with the average return across stocks for each month. This is

the monthly return to an equally weighted portfolio of these $12$ stocks. Compute the mean and

standard deviation of monthly returns for the equally weighted portfolio. Double check that the

average return on this equally weighted portfolio is equal to the average return of all of the individual

stocks. Convert these monthly statistics to annual statistics $($as described in Step $3)$ for interpretation.

$5.$ Using the annual statistics, create an Excel plot with standard deviation $($volatility$)$ on the x$-$axis and

average return on the y$-$axis as follows:

a$.$ Create three columns on your spreadsheet with the statistics you created in Questions $3$ and $4$

for each of the individual stocks and the equally weighted portfolio. The first column will

have the ticker, the second will have annual standard deviation, and the third will have the

annual mean return.

b$.$ Highlight the data in the last two columns $($standard deviation and mean$),$ choose

Insert$>$Chart$>$XY Scatter Plot. Complete the chart wizard to finish the plot.

$6.$ What do you notice about the volatilities of the individual stocks, compared to the volatility of the

equally weighted portfolio?

Your manager was so impressed with your work analyzing the return and standard deviations of the $12$

stocks that he would like you to continue your analysis.

Specifically, he wants you to update the stock portfolio by:

$$ Rebalancing the portfolio with the optimum weights that will provide the best risk and return

combinations for the new $12-$stock portfolio.

$$ Determining the improvement in the return and risk that would result from these optimum

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