In this problem we will visit United Rentals Inc. (URI), which was introduced at the beginning of
Question:
In this problem we will visit United Rentals Inc. (URI), which was introduced at the beginning of the chapter. The following table shows the monthly return on URI stock and on the S&P 500 stock index from January 2009 to December 2014.
Questions
a. Using an Excel spreadsheet calculate the average monthly return on URI stock and on the S&P 500.
b. Using an Excel spreadsheet calculate the standard deviation of monthly returns for URI and the S&P 500. What do your answers tell you about diversifiable risk, undiversifiable risk, and total risk?
c. Using an Excel spreadsheet plot the returns of URI on the vertical axis and the returns of the S&P 500 on the horizontal axis of a graph. Does it appear that URI and the S&P 500 are correlated? If so, are they correlated positively or negatively?
d. Using an Excel spreadsheet add a trend line that best fits the scatterplot of points that you created in part c. What is the slope of this line? How can you interpret the slope? What does it say about the risk of URI compared to the risk of the S&P 500?
Step by Step Answer:
Fundamentals Of Investing
ISBN: 9780134083308
13th Edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk