Excel Activity: Evaluating Risk and Return Start with the partial model in the file cho2 P15 Build a Model.xlsx The file contains data for this problem. Goodman Corporation's and Landry Incorporated's stock prices and dividends, along with the Market Index, are shown here. Stock prices are reported for December 31 of each year, and dividends reflect those paid during the year. The market data are adjusted to include dividends. Goodman Corporation Landry Incorporated Market Index Year Stock Price Dividend Stock Price Dividend Includes Dividends 2021 $26.12 $1.80 $71.33 $4.36 18,106.48 2020 22.09 1.65 75.96 4.23 13,729,32 2019 24.82 1.55 71.33 4.02 13,004,70 2018 16.22 1.48 84 68 3.65 10,404.30 2017 16.99 1.40 88.77 3.33 8,949.63 2016 11.61 1.34 82.53 2.95 7,336.82 The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. Use a minus sign to enter negative values, if any. Download spreadsheet Cho2 PES Build a Model-f3251.xlsx a. Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, and then calculate average annual returns for a. Use the data given to calculate annual returns for Goodman, Londry, and the Market Index, and then calculate average annual returns for the two stocks and the Index. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to out the capital gain or loss, adding the dividend to the capital gain or loss, and then dividing the result by the beginning price. Assume that dividonds are already included in the Index. Also, you cannot calculate the rate of return for 2016 because you do not have 2015 data) Round your answers to two decimal places Year Goodman Corporation Landry Incorporated Market Index 2021 % 96 96 % 2020 2019 2018 2017 96 96 % 96 96 Average b. Calculate the standard deviations of the returns for Goodman, Landry, and the Market Index (Hint: Use the sample standard deviation formula, which corresponds to the STDEV.S function in Excl.) Round your answers to two decimal places. Goodman Corporation Landry Incorporated Market Index Standard deviation c. Construct a scatter diagram graph that shows Goodman's returns on the vertical axis and the Market Index's returns on the horizontal axis. Construct a similar graph showing Landry's stock returns on the vertical ads. Choose the correct graph c. Construct a scatter diagram graph that shows Goodman's returns on the vertical axis and the Market Index's returns on the horizontal axis Construct a similar graph showing Landry's stock returns on the vertical axis. Choose the correct graph The correct graph is Stock Returns Index's Returns B. A. Stock Returns vs Index's Returns 20 70% 60% 60% $ 5096 40 4046 30 Stock Retuma 3096 Storch 209 20%- 108 10% 011 204 109 Oto 0 104 30 3048 -1046 -1094 -209 -20 ose Goon Corporation Landry Inesperated Indeks Retur Goodman Corporation Lady Incorporated Stock Raum Indee's Retur Stock Returns Index's Returns D 70% 7096 6011 604 50 509 10N 401 304 Stock Rom Stock Rum 30% 2016 20%- 104 10% 04 1046 304 109 2011 SON 109 2014 de Rei Goods Corporis Lady od -2015 Index's Returns Goodmans Corporation Landey Incorporated egression lines with stock return on the vertical axis axis) and market return d. Estimate Goodman's and Landry's betos as the slopes of regression lines with stock return on the vertical axis (y-axis) and market return on the horizontal axis (x-axis). (Hint: Use Excel's SLOPE function.) Round your answers to four decimal places, Goodman's beta Landry's beta Are these betas consistent with your graph These betes consistent with the scatter diagram e. The risk-free rate on long-term Treasury bonds is 6,44 Assume that the market risk premium is 3%. What is the required return on the market? Round your answer to two decimal places Now use the SML equation to calculate the two companies' required returns. Round your answers to two decimal places: Goodman's required return Landry's required return; f. If you formed a portfolio that consisted of 50% Goodman stock and 50% Landry stock, what would its beta and its required return be wwwwwww Now use the SML equation to calculate the two companies' required returns. Round your answers to two decimal places. Goodman's required return: Landry's required return: f. If you formed a portfolio that consisted of 50% Goodman stock and 50% Landry stock, what would its beta and its required return be Round your answer for the portfolio's beta to four decimal places and for the portfolio's required return to two decimal places Portfolio's beta Portfolio's required return 9. Suppose an investor wants to include some Goodman Industries stock in his portfolio Stocks A, B, and are currently in the portfolio, and their betas are 0.748, 0.903, and 1.236, respectively. Calculate the new portfolio's required return if it consists of 20 Goodman, 15 Stock A, 40% Stock B, and 25% Stock C. Round your answer to two decimal places. Check My Work Reset