USE EXCEL

2. The second tab in the excel file has three years of monthly data for a small-cap value ETF (VBR), Target (TGT), and the market. Assume a risk-free rate of 0 for this question. Based on this data, compute the following (12 points): a. Compute the average return and standard deviation of each asset (1 point). b. Are any assets (VBR, TGT, or the market) mean-variance dominated? Explain why or why not? (2 points). c. Compute the beta and r-squared of each asset with respect to the market? (1 point). d. Which assets (VBR or Target) returns have been better explained by the market return? Justify your answer and intuitively explain why this finding makes sense (1 point). 2 e. What is the equation of the security market line and the capital market line? Please include specific values for the risk free rate, the market risk premium, and the slope of the capital market line (2 points). f. Compute the required return (according to the SML) and the alpha of VBR, Target, and the Market? (2 points). g. If you had to invest 100% in 1 asset, which asset (VBR or Target) would be the less risky investment? (1 point). h. What is the difference between standard deviation and beta? Under what circumstances is standard deviation the right measure of risk? Under what circumstances is beta the right measure of risk? (Note: this is purely a conceptual question, excel is not needed) (2 points). 2. The second tab in the excel file has three years of monthly data for a small-cap value ETF (VBR), Target (TGT), and the market. Assume a risk-free rate of 0 for this question. Based on this data, compute the following (12 points): a. Compute the average return and standard deviation of each asset (1 point). b. Are any assets (VBR, TGT, or the market) mean-variance dominated? Explain why or why not? (2 points). c. Compute the beta and r-squared of each asset with respect to the market? (1 point). d. Which assets (VBR or Target) returns have been better explained by the market return? Justify your answer and intuitively explain why this finding makes sense (1 point). 2 e. What is the equation of the security market line and the capital market line? Please include specific values for the risk free rate, the market risk premium, and the slope of the capital market line (2 points). f. Compute the required return (according to the SML) and the alpha of VBR, Target, and the Market? (2 points). g. If you had to invest 100% in 1 asset, which asset (VBR or Target) would be the less risky investment? (1 point). h. What is the difference between standard deviation and beta? Under what circumstances is standard deviation the right measure of risk? Under what circumstances is beta the right measure of risk? (Note: this is purely a conceptual question, excel is not needed) (2 points)