You are given the following information concerning a stock and the market: Retur

Question

You are given the following information concerning a stock and the market:

Returns

Year Market Stock

2008 18 % 34 %

2009 11 27

2010 12 3

2011 –14 –21

2012 37 16

2013 15 22

1. Calculate the average return and standard deviation for the market and the stock. (Use excel to complete the problem. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Market Stock Average return % % Standard deviation % %

2. Calculate the correlation between the stock and the market, as well as the stock’s beta. (Use excel to complete the problem. Do not round intermediate calculations. Round your Correlation answer to 2 decimal places and Beta answer to 4 decimal places.) Correlation Beta

Explanation / Answer

Answer: Table for Market average return , stock average return, Standard deviation of stock and market

Year Market Stock Average return Market Averge stock return Average standard deviation Market Average standard deviation stock return correlation covariance Variance 2008 18% 34% 18% 34% 18% 34% 2009 11% 27% 11% 27% 11% 27% 2010 12% 3% 12% 3% 12% 3% 2011 -14% -21% -14% -21% -14% -21% 2012 37% 16% 37% 16% 37% 16% 2013 15% 22% 15% 22% 15% 22% 13% 14% 0.14 0.18 0.67 0.02 0.026 Beta 0.8175 Formulale sum of observation/No of observations sum of observation/No of observations use of function ins excel standard p use of function ins excel standard p use formulae of correlation in excel by both the array of market and stock use of formulae covariance s in excel use of formulae of variance s in excel Covariance / Variance

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