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Use excel, historical prices, (and some thought) to answer the following question: Calculate the 5-year monthly returns for Oracle Corporation (ORCL) ending on or around
Use excel, historical prices, (and some thought) to answer the following question:
Calculate the 5-year monthly returns for Oracle Corporation (ORCL) ending on or around June 1, 2020. Calculate the corresponding 5-year monthly returns for the S&P 500 (^GSPC).
- Calculate the covariance between the return series
- Calculate the Beta implied by that covariance
- Graph the returns with the S&P returns on the x-axis and the Oracle returns on the y-axis. Add a trendline.
- Use the regression tool (under Tools/Data Analysis) to calculate a regression with Oracle returns as the y-variable, S&P returns as the x-variable.
- What is the 95% confidence interval for your Beta? What does that mean?
- What proportion of the variance in Oracles returns is explained by the CAPM?
- Given your calculated Beta, if you expect a 7% return for the S&P 500 over the next year, and if short term rates are currently at 0.5%, what returns do you expect for Oracle?
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