Risk and Return

Use the following data to explore the risk-return relation and the concept of beta for Apple stock, Kroger stock, and the S&P 500 market index:

Year	Apple Stock Price	Kroger Stock Price	S&P 500 Market Index
2020	$252.92	$30.71	3,234.85
2019	$156.23	$27.66	2,531.94
2018	$169.23	$27.32	2,753.15
2017	$125.17	$29.52	2,276.98
2016	$108.41	$31.80	2,043.94
2015	$112.98	$33.37	2,058.20

Part 1: Risk and Beta

1. Calculate the return each year for Apple, Kroger, and the Market using the equation:

Return = (Value this year Value last year) / Value last year. In addition, use the Excel function Average to find the average of the returns. (10 Points)

Year	Apple Returns	Kroger Returns	S&P 500 Market Index Returns
2020
2019
2018
2017
2016

Average Returns

2. Calculate the standard deviation of rates of return for Apple, Kroger, and the Market using the Stdev Excel function. (10 Points)

Apple Standard Deviation of Returns	Kroger Standard Deviation of Returns	S&P 500 Market Standard Deviation of Returns

3. Make a scatter plot of stock returns (y-axis) against market returns (x-axis) for both Apple and Kroger stock in one plot. Add a linear trend line to the scatter plot for each stock and include the equation on the chart (Select data point and right click then select "add trendline" and choose a "linear" trend and select "display equation on chart"). Label the y-axis, x-axis, legend, and chart title. (10 Points)

4. For each stock, use the Excel function Correl to calculate the correlation between the stock returns and market returns. Furthermore, copy the standard deviations from above (by cell reference) and calculate the beta according to the equation: Beta = (Standard deviation of stock / Standard deviation of market) (Correlation between stock and market). (10 Points)

	Correlation	Stock Standard Deviation (in decimal form)	Market Standard Deviation (in decimal form)	Beta
Apple
Kroger