Question

(Expected return, standard deviation, and capital asset pricing model) The following are the end-of-month prices for both the Standard & Poor's 500 index and Nike's common stock a. Using the data in the popup window, calculate the holding period returns for each of the months b. Calculate the average monthly return and the standard deviation for both the S&P 500 and Nike c. Develop a graph that shows the relationship between the Nike stock returns and the S&P 500 Index Show the Nike returns on the verticals Index returns on the horizontal axis.) d. From your graph.describe the nature of the relationship between Nike stock returns and the returns for the S&P 500 Index. and the S&P 500 a. Using the data in the table, calculate the holding period returns for each of the months for both the Standard & Poor's 500 index and Nike's common stock and fi in the banks below. (Round to two decimal places) NIKE NIKE RETURN S&P 500 INDEX S&P 500 RETURN 2014 May $76.91 $1,924 77.55 77.55 % 1.900 % Data Table NIKE S&P 500 INDEX 2014 $76.91 $1.924 1,960 1,931 2.003 September October November December 2015 77 55 77.13 78.55 89 20 92 97 99.29 16.15 2018 2.068 February 92.25 97.12 100.33 98.84 104 43 2,105 2.068 2,086 2.128 Print Done

Answer 1

					Nike	Nike	Nike	S&P Index	S&P Index	S&P Index
				2014		Return	Return		Return	Return
	S&P Return	Nike Return		May	$76.91		(Percentage)	$1,924		(Percentage)
	-3.58%	-3.05%		June	$77.55	0.0083	0.83%	$1,960	0.018711	1.87%
	-1.76%	3.31%		July	$77.13	(0.0054)	-0.54%	$1,931	-0.0148	-1.48%
	-1.55%	13.56%		August	$78.55	0.0184	1.84%	$2,003	0.037286	3.73%
	-1.48%	-0.54%		September	$89.20	0.1356	13.56%	$1,972	-0.01548	-1.55%
	-0.10%	-1.39%		October	$92.97	0.0423	4.23%	$2,018	0.023327	2.33%
	0.05%	-4.17%		November	$99.29	0.0680	6.80%	$2,068	0.024777	2.48%
	1.87%	0.83%		December	$95.15	(0.0417)	-4.17%	$2,069	0.000484	0.05%
	2.33%	4.23%	2015	Jaunary	$92.25	(0.0305)	-3.05%	$1,995	-0.03577	-3.58%
	2.48%	6.80%		February	$97.12	0.0528	5.28%	$2,105	0.055138	5.51%
	3.00%	5.55%		March	$100.33	0.0331	3.31%	$2,068	-0.01758	-1.76%
	3.73%	1.84%		April	$98.94	(0.0139)	-1.39%	$2,066	-0.00097	-0.10%
	5.51%	5.28%		May	$104.43	0.0555	5.55%	$2,128	0.03001	3.00%
					SUM	0.3224		SUM	0.105149
			Return of Nike for the month of June=(77.55/76.91)-1	0.008321
			Return of S&P for the month of June=(1960/1924)-1	0.018711
		a	Holding Period Return of Nike =(104.43/76.91)-1=	0.357821	35.78%
			Holding Period Return of S&P =(2128/1924)-1=	0.106029	10.60%
		b	Average Monthly Return of Nike=0.3224/12=	0.0269	2.69%
			Standard Deviation of Return of Nike	0.048972	4.90%	(Using STDEV function of excel)
			Average Monthly Return of S&P=0.105149/12=	0.008762	0.88%
			Standard Deviation of Return of S&P	0.02691	2.69%	(Using STDEV function of excel)
		d	There is no established relationship as per graph(Below 0%)	Above 0%, Nike return increases with increase in S&P return
									fox -STDEV (15:116) G25 В D Е F G Н K 2014 Return Return $1,924 $1,960 $76.91 (Percentage) 4 May $77.55 0.0083 0.83% 5 June $77.13 $1,931 July (0.0054) 6 -0.54% $2,003 $78.55 0,0184 1.84% 7 August Septembe $89.20 $92.97 $1,972 13.56% 0.1356 $2,018 October 0.0423 4,23% $99.29 $2,068 Novembe 6.80% 10 0.0680 $2,069 $1,995 December $95.15 (0.0417) -4.17% 11 $92.25 $97.12 2015 Jaunary (0.0305) -3.05% 12 $2,105 February 0.0528 5.28% 13 $100.33 $2,068 March 3.31% 14 0.0331 $98.94 (0.0139) $2,066 April -1.39% 15 $104.43 $2,128 May 5.55% 16 0.0555 17 SUM 0.3224 SUM 18 Return of Nike for the month of May-(77.55/76.91) -1 Return of S&P for the month of May (1960/1924)-1 Holding Period Return of Nike (104.43/76.91)-1 Holding Period Return of S&P (2128/1924)-1= 0.008321 19 20 0.018711 0.357821 35.78% 21 a 10.60% 22 0.106029 23 b 2.69% 24 Average Monthly Return of Nike-0.3224/12= 0.0269 0.048972 Standard Deviation of Return of Nike 4.90% (Using STDEV function of excel) 25 26 Nike Return 16.00% 14.00 % 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% -3 00% 00% -2.00% 6.00% -5.00% -4.00 % -2.00% -1.00% 100 2.00% 3.00% 4.00% 5.00% -4.00 % -6.00%