a. Use the data given to calculate annual returns for Bartman, Reynolds, and the Market Index, and
Question:
a. Use the data given to calculate annual returns for Bartman, Reynolds, and the Market Index, and then calculate average returns over the five-year period. 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 2005 because you do not have 2004 data.
Data as given in the problem are shown below:\r\n
Bartman Industries | Reynolds Incorporated | Market Index | ||||
Year | Stock Price | Dividend | Stock Price | Dividend | Includes Divs. | |
2010 | $17.250 | $1.150 | $48.750 | $3.000 | 11,663.98 | |
2009 | 14.750 | 1.060 | 52.300 | 2.900 | 8,785.70 | |
2008 | 16.500 | 1.000 | 48.750 | 2.750 | 8,679.98 | |
2007 | 10.750 | 0.950 | 57.250 | 2.500 | 6,434.03 | |
2006 | 11.375 | 0.900 | 60.000 | 2.250 | 5,602.28 | |
2005 | 7.625 | 0.850 | 55.750 | 2.000 | 4,705.97 |
We now calculate the rates of return for the two companies and the index:\r\n
Bartman | Reynolds | Index | ||||
2010 | ||||||
2009 | ||||||
2008 | ||||||
2007 | ||||||
2006 | ||||||
Average |
Note: To get the average, you could get the column sum and divide by 5, but you could also use the function wizard, fx. Click fx, then statistical, then Average, and then use the mouse to select the proper range. Do this for Bartman and then copy the cell for the other items.\r\n
b. Calculate the standard deviation of the returns for Bartman, Reynolds, and the Market Index. (Hint: Use the sample standard deviation formula given in the chapter, which corresponds to the STDEV function in Excel.) \r\n
Use the function wizard to calculate the standard deviations.\r\n
Bartman | Reynolds | Index | ||||
Standard deviation of returns | ||||||
c. Now calculate the coefficients of variation Bartman, Reynolds, and the Market Index. |
Bartman | Reynolds | Index | ||||
Coefficient of Variation | ||||||
d. Construct a scatter diagram graph that shows Bartman |
Financial accounting
ISBN: 978-0132751124
9th edition
Authors: Walter T. Harrison Jr., Charles T. Horngren, C. William Thom