Problems: Evaluating Risk and Return (Brigham -221 Bartman Industries' and Reynolds Inc.'s stock prices and dividends, along with the Winslow 5000 Index, are shown here for the period 2010-2015. The Winslow 5000 data are adjusted to include dividends. _ Bartman Industries Reynolds Inc. Winslow 5000 Stock Price Dividend Stock Price 11,663.98 8,785.70 8,679.98 6,434.03 _ 11.375 0.900 50.000 5,502.23 a. Use the data to calculate annual rates of return for Bartman, Reynolds, and the Winslow 5000 Index. Then calculate each entity's average return over the 5-year period. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to get the capital gain or loss, adding the dividend to the capital gain or loss, and dividing the result by the beginning price. Assume that dividends are already included in the index. Also, you cannot calculate the rate of return for 2010 because you do not have 2009 data.) b. Calculate the standard deviations of the returns for Bartman, Reynolds, and the Wiinslow 5000. (Hint: Use the sample standard deviation formula in Lecture 6, which corresponds to the STDEV function in Excel.) c. Calculate the coefficients of variation for Bartman, Reynolds, and the Wiinslow 5000. d. Construct a scatter diagram graph that shows Bartman's and Reynolds' returns on the vertical axis and the Winslow 5000 lndex's returns on the horizontal axis. e. Estimate Bartman's and Reynolds' betas by running regressions of their returns against the index's returns. Are these betas consistent with your graph? f. Assume the risk-free rate on long-term Treasury bonds is 4.5%. Assume also that the average annual return on the Winslow 5000 is not a good estimate of the market's required returnit is too high. 50 use 10% as the expected return on the market. Use the SML equation to calculate the two companies' required returns. g. If you formed a portfolio that consisted of 50% Bartman and 50% Reynolds, what would the portfolio's beta and required return be? h. Suppose an investor wants to include Bartman lndustries' stock in his portfolio. Stocks A, B, and C are currently in the portfolio; and their betas are 0.769, 0.985, and 1.423, respectively. Calculate the new portfolio's required return if it consists of 25% of Bartman. 15% of Stock A. 40% of Stock B. and 20% of Stock C