Question: (a) Create monthly net returns for Disney, the S&P 500 index, and the risk-free rate. (b) Calculate excess returns for Disney stock and for the

  1. (a) Create monthly net returns for Disney, the S&P 500 index, and the risk-free rate.

  2. (b) Calculate excess returns for Disney stock and for the S&P 500 index by subtracting, in each month, the monthly treasury return from the stock/index return.

  3. (c) Calculate and report the beta of Disney stock using the formula:

= Cov(r,rM)/Var(rM ) = Cov(r,rM)/m2 = Corr(r,rM)SD(r)m2/SD(rM )

Excel functions:

CORREL(array1,array2) STDEV.S(number1,number2,...)

COVARIANCE.S(array1,array2)

DIS S&P 500 T-Bill
Date Price Price Price
Dec-15 105.08 2043.94 1248.086
Jan-16 95.82 1940.24 1251.238
Feb-16 95.52 1932.23 1251.728
Mar-16 99.31 2059.74 1253.442
Apr-16 103.26 2065.3 1254.277
May-16 99.22 2096.96 1253.781
Jun-16 97.82 2098.86 1257.529
Jul-16 95.95 2173.6 1256.977
Aug-16 94.46 2170.95 1256.835
Sep-16 92.86 2168.27 1257.572
Oct-16 92.69 2126.15 1258.268
Nov-16 99.12 2198.81 1256.985
Dec-16 104.22 2238.83 1257.67

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