Question: Use the following data to explore the risk-return relation and the concept of beta for Apple stock, Alphabet (Google) stock, and the S&P 500 market

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

Year

Apple Stock Price

Alphabet Stock Price

S&P 500 Market Index

2017

$174.09

$1,072.01

2,601.42

2016

$115.82

$807.80

2,238.83

2015

$105.26

$765.84

2,043.94

2014

$113.99

$521.51

2,058.90

2013

$80.01

$559.76

1,848.36

2012

$72.80

$358.17

1,426.19

Part 1: Risk and Beta

  1. Make a scatter plot of stock returns (y-axis) against market returns (x-axis) for both Apple and Alphabet 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 (9 Points)
  2. 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) (9 Points)

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