Task $2$: Return, Risk, and the Security Market Line

Suppose you have just begun working for an investment firm called Covili and Wyatt. Paul

Covili, one of the firm's founders, has been talking to you about the firm's investment portfolio. As

with any investment, Paul is concerned about the risk of the investment as well as the potential

return. More specifically, because the company holds a diversified portfolio, Paul is concerned about

the systematic risk of current and potential investments. The company currently holds positions in

NVIDIA Corp. $($NVDA$)$ and Walmart Inc. $($WMT$)$ stocks. Paul has asked you to do the following

assignments.

Questions:

Using monthly data for the last $73$ months, estimate the average monthly returns and

standard deviations for NVDA, WMT$,$ Three$-$month Treasury Bill, and S&P $500(25$ points$)$

Use the market model to estimate the beta for each of the two stocks $($NVDA and WMT$)$

using excess returns of the last $72$ months. Then, estimate the annual required return for

each stock based on CAPM using the estimated betas, the average market risk premium, and

the average risk$-$free rate. $(15$ points$)$

If you choose to invest $30\%$ of the funds on NVDA and the remaining $70\%$ on WMT$,$ what will

be the beta and expected return on your portfolio? $(5$ points$)$ Output

Question $7$

Average monthly return

Standard deviation of return

Question $8$

Beta

Expected return $($annual$)$

Question $9$

Weight of NVDA

Weight of WMT

Portfolio Beta

Portfolio Expected return $($annual$)$ DATES START FROM $3/1/18$ TO $3/1/24.$ PLEASE PROVIDE EXCEL FORMULAS