Question: FIN 132 - Efficient Frontier (Risk and Return) Professor A. Spieler The following table (Table 1) represents CLOSING prices for America Online (AOL), Anheuser Busch
FIN 132 - Efficient Frontier (Risk and Return)
Professor A. Spieler
The following table (Table 1) represents CLOSING prices for America Online (AOL), Anheuser Busch (BUD), Coca-Cola (KO), and TransWorld Airlines (TWA). Assume the return on a Treasury Bill is 4% per year (.33% per month). Clearly indicate your answers by underlining or putting them in a box.
The data in Tables 1 and 2 can be downloaded in spreadsheet form from the class Blackboard site.
1. (a) Calculate the MONTHLY returns for each asset (AOL, BUD, KO, TWA).
(b) Calculate the variance and standard deviation of RETURNS for each asset (AOL, BUD, KO, TWA) over the 36-month period from 7/96-6/99.
(c) Comment on the difference between expected return and realized return.
(d) Find the total return over the 36-month period for each stock. Which stock had the highest and lowest returns? Was this expected? Are these results consistent with the general risk-return relationship?
(e) Are these the actual closing prices or prices adjusted for changes in capitalization, i.e. stock splits, etc.? How do you know?
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
Study Help