Question

4. You have observed the following returns for Market, Apple, and Microsoft for last 3 vearS: Period Market 0.12 0.10 0.09 0.15 0.10 0.13 Microsoft 0.07 0.05 0.03 a) Calculate the market's return and standard deviation. Write out all the setups for each calculation. Use sample standard deviation formula. b) Calculate both the sample covariance and correlation coefficient between the market and Apple, and between the market and Microsoft. Write out all the setups for each calculation Calculate the betas for Apple and Microsoft, respectively, using i) ơw, ii) piw, iii) using 'slope' function, and iv) using 'regression' function on Excel. c) ƠM FINC 323 FINANCIAL MANAGEMENT 2 d) Calculate portfolio beta of Apple and Microsoft with equal weight (0.5) for each

Answer 1

Calculation of average return and standard deviation of market:

Calculation of Covariance and Beta:Formula sheet