Q #1

(Expected return. standard deviation and capital asset prising model} The following are the endeofrmonth prices for both the Standard & Poor's 500 Index and Nike's common stock. a. Using the data in the popup window, ' calculate the holdingeperiod returns for each ofthe months b. Calculate the average monthly return and the standard deviation for both the S&P 500 and Nike c. Develop a graph that shows the relationship between the Nike stock returns and the S&P 500 Index, (Show the Nike returns on the vertical aXis and the S&P 500 Index returns on the horizontal axis ) d. From your graph, describe the nature of the relationship between Nike stock returns and the returns for the S&P 500 Index, a. Usrng the data in the table, calculate the holding-period returns for each of the months for both the Standard & Poor's 500 Index and Nike's common stock and ll In the blanks below (Round to two decimal places.) NIKE NIKE RE'IURN S&P 500 INDEX S&P 500 RETURN 2014 May $76,531 $1,924 June 77.55 % 1:960 % X Data table NIKE S&P 500 INDEX 2014 May $76.91 $1,924 June 77.55 1,960 July 77.13 1,931 August 78.55 2,003 September 89.20 1,972 October 92.97 2,018 November 99.29 2,068 December 96.15 2,059 2015 January 92.25 1,995 February 97.12 2, 105 March 100.33 2,068 April 98.84 2,086 May 104.43 2,128 Print Done(Required rate of return using CAPM) a. Compute a fair rate of return for Intel common stock, which has a 1.1 beta. The risk-free rate is 7 percent, and the market portfolio (New York Stock Exchange stocks) has an expected return of 14 percent. b. Why is the rate you computed a fair rate? a. Using the CAPM, the fair rate of return for Intel common stock is %. (Round to two decimal places.)