Use the following for #1-5: Use Yahoo! Finance to download the monthly stock pri

ID: 2742150 • Letter: U

Question

Use the following for #1-5:

Use Yahoo! Finance to download the monthly stock prices for Netflix (NFLX) from January 2012 until January 2015 (36 return observations). (Hint: You just need the Date and Adj Close prices column from here).

Use excel to answer the following questions:

1. What is the Holding Period Return (HPR)?

What is the Geometric Average Return (GAR)?

(hint: GAR= [[(1+R1)(1+R2+…+(1+Rn)]^(1/n)] – 1)

What is the Arithmetic Average Return (AAR)?

What is the Standard Deviation of the monthly return (SD)?

2. What are the annualized values for each of these?:

Annualized GAR: (hint: [(1+GAR)^(1/12)] – 1)

Annualized AAR:

Annualized SD:

3-4. Copy and paste the following Netflix quote in excel, then answer the following questions about your quote:

Netflix, Inc. (NFLX)

-NasdaqGS

Watchlist

100.04

2.72(2.79%) Oct 23, 4:00PM EDT

After Hours : 100.00

0.04 (0.04%) Oct 23, 7:59PM EDT

Prev Close:

97.32

Open:

97.66

Bid:

99.86 x 500

Ask:

100.02 x 300

1y Target Est:

123.05

Beta:

1.27689

Earnings Date:

Jan 18 - Jan 22 (Est.)

Day's Range:

97.27 - 101.56

52wk Range:

45.08 - 129.29

Volume:

18,019,886

Avg Vol (3m):

21,808,400

Market Cap:

42.76B

P/E (ttm):

266.06

EPS (ttm):

0.38

Div & Yield:

N/A (N/A)

3b. How much is the spread in your quote?

3c. How much is the depth on the limit order book in your quote?

3d. How many shares were traded during the day of your quote?

4a. What is the total value of all common stock for this firm? (Hint: Market Capital)

4b. What stock exchange is Netflix listed on?

4c. Calculate the daily return for Netflix for the day of your quote?

5-6. The quote for a call option on Netflix with a strike price of $120.00 and an expiration date of November 20th, 2015 are given below:

5a. Copy and paste the Netflix option quote in excel and then answer the following questions.

5b. What was the price of the last trade for this option?

5c. What is the intrinsic value of this option? [Hint: max(S – X, 0)]

5d. Is this option in-the-money or out-of-the-money?

5e. What is the daily return for this option?

6a. What is the spread for this option?

6b. How many contracts are available for this strike price and this expiration date?

6c. How many contracts have been traded today for this strike price and this expiration date?

7. On Yahoo! Finance find the quote for the US dollar – Japanese Yen exchange rate (USD/JPY). Copy and paste it in excel and answer the following questions.

7a. Indicate the current USD/JPY exchange rate:

7b. Using Yahoo!’s interactive charts, find out the exchange rate 1 year ago.

7c. Based on this, compute the 1-year US dollar return.

Netflix, Inc. (NFLX)

-NasdaqGS

Watchlist

100.04

2.72(2.79%) Oct 23, 4:00PM EDT

After Hours : 100.00

0.04 (0.04%) Oct 23, 7:59PM EDT

Prev Close:

97.32

Open:

97.66

Bid:

99.86 x 500

Ask:

100.02 x 300

1y Target Est:

123.05

Beta:

1.27689

Earnings Date:

Jan 18 - Jan 22 (Est.)

Day's Range:

97.27 - 101.56

52wk Range:

45.08 - 129.29

Volume:

18,019,886

Avg Vol (3m):

21,808,400

Market Cap:

42.76B

P/E (ttm):

266.06

EPS (ttm):

0.38

Div & Yield:

N/A (N/A)

Explanation / Answer

Holding Period Return = (Ending Price – Beginning Price + Interest or dividends) / Beginning Price

= > (63.11 – 17.17)/17.17 = 2.6755 or 267.55%

GAR: Please see the below table:

Date

Adj Close

Monthly Return

1+Monthly Return

(Monthly Return - Monthly Arithmetic Average Return)^2

03/01/2012

17.171429

01/02/2012

15.818571

-0.078785406

0.921214594

0.017354084

01/03/2012

16.434286

0.038923554

1.038923554

0.000196727

02/04/2012

11.448571

-0.303372778

0.696627222

0.126965563

01/05/2012

9.062857

-0.208385309

0.791614691

0.06829588

01/06/2012

9.784286

0.079602823

1.079602823

0.0007104

02/07/2012

8.121428

-0.1699519

0.8300481

0.049685033

01/08/2012

8.531428

0.050483733

1.050483733

6.07999E-06

04/09/2012

7.777143

-0.088412514

0.911587486

0.019983218

01/10/2012

11.32

0.455547365

1.455547365

0.162085044

01/11/2012

11.672857

0.031171113

1.031171113

0.000474298

03/12/2012

13.227143

0.133153863

1.133153863

0.00643274

02/01/2013

23.605715

0.784642005

1.784642005

0.535373927

01/02/2013

26.868572

0.13822318

1.13822318

0.007271601

01/03/2013

27.040001

0.00638028

1.00638028

0.002168692

01/04/2013

30.867144

0.141536348

1.141536348

0.00784763

01/05/2013

32.32143

0.047114369

1.047114369

3.40487E-05

03/06/2013

30.155714

-0.067005575

0.932994425

0.014389219

01/07/2013

34.925713

0.158178944

1.158178944

0.011073237

01/08/2013

40.558571

0.161281117

1.161281117

0.01173574

03/09/2013

44.172855

0.089112706

1.089112706

0.001307778

01/10/2013

46.068573

0.042915904

1.042915904

0.000100673

01/11/2013

52.257141

0.134333833

1.134333833

0.00662341

02/12/2013

52.595715

0.006479

1.006479

0.002159507

02/01/2014

58.475716

0.111796199

1.111796199

0.003462934

03/02/2014

63.66143

0.088681496

1.088681496

0.001276776

03/03/2014

50.290001

-0.210039721

0.789960279

0.069163328

01/04/2014

46.005714

-0.085191627

0.914808373

0.01908297

01/05/2014

59.689999

0.297447508

1.297447508

0.059779278

02/06/2014

62.942856

0.054495846

1.054495846

2.3912E-06

01/07/2014

60.388573

-0.040580983

0.959419017

0.008747951

01/08/2014

68.234283

0.12992044

1.12992044

0.005924526

02/09/2014

64.454285

-0.055397343

0.944602657

0.011739038

01/10/2014

56.110001

-0.129460501

0.870539499

0.033273407

03/11/2014

49.512856

-0.117575207

0.882424793

0.029078675

01/12/2014

48.80143

-0.014368511

0.985631489

0.004531714

02/01/2015

63.114285

0.293287615

1.293287615

0.057762411

GAR = (Product of all 1+Monthly return)1/36-1

Product of all 1+monthly return

3.675540632

(Product of all 1+monthly return)1/36

1.036820003

GAR

0.036820003

So, GAR = 3.68%

Arithmetic Average Return = Sum of all monthly returns / Number of returns

= 190.62% / 36 = 5.29%

Standard Deviation of Monthly Returns:

[Sum of (Monthly Return - Monthly Arithmetic Average Return)2 /36] ½

= [1.356099929/36]1/2 = 0.194086173

Annualized GAR = (Product of all 1+Yearly return)1/3 -1

= {[(1)] + [(23.6057 – 17.17143)/17.17143]} x {[(1)] + [(58.47572 – 23.6057)/23.6057]} x {[(1)] + [(63.114285 – 58.47572)/ 58.47572]} 1/3 – 1 = 0.543264654 or 54.3264%

Annualized AAR = Sum of all yearly returns / Number of returns
= {[(23.6057 – 17.17143)/17.17143]] + [(58.47572 – 23.6057)/23.6057]} + [(63.114285 – 58.47572)/ 58.47572]} / 3
= 1.931218231/3 = 0.64373941 or 64.3739%

Annualized Standard Deviation = Monthly Standard deviation x Square root of 12

= 0.194086173 x 3.464101615 = 0.672334225