Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

(use this problem to answer questions 6-10) A stock broker is examining the stock price behavior of two energy companies. She has a hunch that

image text in transcribed
image text in transcribed
(use this problem to answer questions 6-10) A stock broker is examining the stock price behavior of two energy companies. She has a hunch that the prices of the two stocks vary with the retail price of gasoline at the pump. But she also suspects that the price variations may not be similar due to differences in the product mix of the two companies. Her database contains the average weekly gas retail prices for the past decade and the corresponding average weekly stock price for each of the two companies for the same 10 year period. She runs a correlation analysis between the retail gas prices (variable x) and stock prices (variable y) for each of the companies separately. The correlation coefficient for company A is 0.943. The correlation coefficient for company B is 0.245. She also runs a volatility analysis on the stock prices for each company. She finds that the mean average weekly stock price for company A during the past 10 years is $120 and the standard deviation is $6. 6. What does the correlation coefficient for company A tell the stock broker about the relationship between gas price and its stock price? a. The relationship is positive and weak b. The relationship is negative and weak c. The relationship is positive and strong d. The relationship is negative and strong 7. What does the correlation coefficient of company B tekk the stock broker about the relationship between gas price and its stock price? a. The relationship is positive and weak b. The relationship is negative and weak c. The relationship is positive and strong d. The relationship is negative and strong 8. What is the coefficient of variations for company A's stock price? Show your work. 9. What is the coefficient of variation for company B's stock price? Show your work. 10. What can the stock broker conclude from all of her analyses of the stock price behaviors of the two energy companies? a. Company A is the least volatile of the two stocks b. Company B is the least volatile of the two stocks c. Company A's stock is a better buy than company B's stock, given their respective average stock prices

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_2

Step: 3

blur-text-image_3

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

Ordinary Differential Equations

Authors: William A Adkins, Mark G Davidson

1st Edition

1461436184, 9781461436188

More Books

Students also viewed these Mathematics questions