Question: Your customer asks you to estimate the annual excess return on the Microsoft stock investment . You have collected the data, such as monthly stock

Your customer asks you to estimate the annual excess return on the Microsoft stock investment. You have collected the data, such as monthly stock prices, risk-free rate, market returns. Using the data, calculate the annual excess return on the investment (Round to the nearest thousandth. e.g., 0.16666 must be expressed as 0.167) (Hint: The excess return on the stock investment is also known as Jensen's Alpha).

Your customer asks you to estimate the annual excess return on the

year month Risk-Free Rate Market Return 2006 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 0.0042475 0.004225833 0.0042475 0.004165833 0.004064167 0.003909167 0.003969167 0.004085 0.003430833 0.003149167 0.003243333 0.0026125 0.002688333 0.001609167 0.001524167 0.001091667 0.001150833 0.001566667 0.001439167 0.001388333 0.001430833 0.000558333 0.000363333 0.000025 0.000093333 0.000200833 0.000211667 0.000169167 0.000105833 0.00011 0.000154167 0.0001475 0.000114167 0.000093333 0.000038333 0.0000425 0.000046667 0.000063333 0.0000975 0.000126667 0.000130833 0.000130833 0.000143333 0.000118333 0.0000975 0.000130833 0.0000975 0.000139167 0.000101667 0.000118333 0.000114167 0.000078333 0.000034167 0.0000425 0.0000125 0.000078333 0.000008333 0.000016667 0.0000025 0 0.000008333 0.000061667 0.000088333 0.000063333 0.000044167 0.000029167 0.000029167 0.000029167 0.000019167 0.0000125 0.000029167 0.000050833 0.000056667 0.0000125 0.0000425 0.000025 0.000025 0.000025 0.000019167 0.000019167 0.000020833 0.000008333 0.000008333 0.000008333 0.000034167 0.01294977 0.01939655 -0.01398767 0.01294977 0.03981525 0.03893219 -0.01476538 -0.03176044 0.01163043 0.04084195 0.0257964 -0.04932737 -0.00442325 -0.06213814 -0.02166337 -0.01042054 0.05106048 0.02380778 -0.0784257 -0.01334129 0.01056561 -0.0979804 -0.1846477 -0.08461469 0.02215415 -0.0773147 -0.1002706 0.08674762 0.1093522 0.06777447 -0.00309918 0.08175195 0.03146854 0.04521635 -0.02797095 0.05711698 0.02843039 -0.03709752 0.03478614 0.06362587 0.02006334 -0.07916308 -0.05074472 0.0703086 -0.04284408 0.09154682 0.03851225 0.00512454 0.06720509 0.01913699 0.03817537 0.00335316 0.02866654 -0.01489987 -0.01838777 -0.02252415 -0.05749821 -0.08486251 0.1140301 -0.0062072 0.00369629 0.05414457 0.00834036 0.03529375 0.01494684 0.01907392 -0.01503552 0.05271696 -0.02572692 0.03747036 0.03989509 0.02496603 0.02613987 -0.0299865 0.04618626 0.00450117 0.00167039 0.0202225 0.02796136 -0.02053673 0.04020714 -0.02513202 0.02119622 0.02115908 -0.00362207 Trading Volume Number of Shares Price ($) Outstanding 13176580 413399 37.5 13390496 414000 36.67 13007733 414679 41.59 12832900 409000 40.08 9676052 409698 59.62 13176580 409698 64.34 11884314 413000 66.39 13008446 413399 71.85 12397224 413399 76.39 11168623 415000 99.62 17744802 415177 93.28 18330717 415177 94.8 10700171 416000 88.15 19530535 416000 74.66 23258303 417212 63.81 14572915 417000 72.01 14480582 417680 80.64 14084270 417680 80.96 15648014 426000 73.33 16420967 425921 75.04 12083088 425921 80.24 19299651 429000 67.7 30441987 428832 55.54 17985595 428832 41.68 15442392 428000 49.85 15618965 428583 67.13 14630937 429120 63.59 16364071 429000 69.55 15703150 429648 76 11077166 429648 77.29 14184830 432000 83.14 15253854 431807 86.04 10003985 431807 82.58 10433262 433000 92.47 15277741 432983 120.21 10236442 432983 132.88 9238424 444000 137.16 13640561 444546 127.63 10779015 445226 120.81 11181446 446000 140.68 13259805 445672 132.71 17259734 445672 121.91 16793127 448000 108.86 14132280 447825 117.89 12827745 447825 127.13 12779695 449000 156.34 12854487 448837 165.63 14174423 448837 174.3 10367260 451000 179.51 13658100 451004 164.18 11176358 451616 171.91 13148095 452000 179.08 13175516 452043 200.68 13677186 452043 202.21 13005667 454000 200.57 12628983 453935 220.28 17248617 453935 212.76 12834491 455000 215.21 12223185 454754 214.93 10497537 454754 191.13 10098074 455000 172.84 11363418 454551 263.83 7736797 454967 263.9 8372531 455000 267.4 14536561 455243 250.79 10663668 455243 269.71 9394212 457000 278.67 11036007 456884 303.88 10443426 456884 286.11 12366043 458000 318.56 9633022 457734 362.5 7965331 457734 390.74 8202590 459000 398.6 9255796 459265 356.07 7182660 459894 362.76 7790153 460000 332.45 7461680 460167 302.11 5747041 460167 305.91 5566350 462000 329.27 7327822 462036 318.44 5139717 462036 339.54 8609490 463000 325.14 8533427 463006 300.92 5230103 463006 335.4 6287260 463006 310.36 2010 2010 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 year month Risk-Free Rate Market Return 2006 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2007 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2008 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 0.0042475 0.004225833 0.0042475 0.004165833 0.004064167 0.003909167 0.003969167 0.004085 0.003430833 0.003149167 0.003243333 0.0026125 0.002688333 0.001609167 0.001524167 0.001091667 0.001150833 0.001566667 0.001439167 0.001388333 0.001430833 0.000558333 0.000363333 0.000025 0.000093333 0.000200833 0.000211667 0.000169167 0.000105833 0.00011 0.000154167 0.0001475 0.000114167 0.000093333 0.000038333 0.0000425 0.000046667 0.000063333 0.0000975 0.000126667 0.000130833 0.000130833 0.000143333 0.000118333 0.0000975 0.000130833 0.0000975 0.000139167 0.000101667 0.000118333 0.000114167 0.000078333 0.000034167 0.0000425 0.0000125 0.000078333 0.000008333 0.000016667 0.0000025 0 0.000008333 0.000061667 0.000088333 0.000063333 0.000044167 0.000029167 0.000029167 0.000029167 0.000019167 0.0000125 0.000029167 0.000050833 0.000056667 0.0000125 0.0000425 0.000025 0.000025 0.000025 0.000019167 0.000019167 0.000020833 0.000008333 0.000008333 0.000008333 0.000034167 0.01294977 0.01939655 -0.01398767 0.01294977 0.03981525 0.03893219 -0.01476538 -0.03176044 0.01163043 0.04084195 0.0257964 -0.04932737 -0.00442325 -0.06213814 -0.02166337 -0.01042054 0.05106048 0.02380778 -0.0784257 -0.01334129 0.01056561 -0.0979804 -0.1846477 -0.08461469 0.02215415 -0.0773147 -0.1002706 0.08674762 0.1093522 0.06777447 -0.00309918 0.08175195 0.03146854 0.04521635 -0.02797095 0.05711698 0.02843039 -0.03709752 0.03478614 0.06362587 0.02006334 -0.07916308 -0.05074472 0.0703086 -0.04284408 0.09154682 0.03851225 0.00512454 0.06720509 0.01913699 0.03817537 0.00335316 0.02866654 -0.01489987 -0.01838777 -0.02252415 -0.05749821 -0.08486251 0.1140301 -0.0062072 0.00369629 0.05414457 0.00834036 0.03529375 0.01494684 0.01907392 -0.01503552 0.05271696 -0.02572692 0.03747036 0.03989509 0.02496603 0.02613987 -0.0299865 0.04618626 0.00450117 0.00167039 0.0202225 0.02796136 -0.02053673 0.04020714 -0.02513202 0.02119622 0.02115908 -0.00362207 Trading Volume Number of Shares Price ($) Outstanding 13176580 413399 37.5 13390496 414000 36.67 13007733 414679 41.59 12832900 409000 40.08 9676052 409698 59.62 13176580 409698 64.34 11884314 413000 66.39 13008446 413399 71.85 12397224 413399 76.39 11168623 415000 99.62 17744802 415177 93.28 18330717 415177 94.8 10700171 416000 88.15 19530535 416000 74.66 23258303 417212 63.81 14572915 417000 72.01 14480582 417680 80.64 14084270 417680 80.96 15648014 426000 73.33 16420967 425921 75.04 12083088 425921 80.24 19299651 429000 67.7 30441987 428832 55.54 17985595 428832 41.68 15442392 428000 49.85 15618965 428583 67.13 14630937 429120 63.59 16364071 429000 69.55 15703150 429648 76 11077166 429648 77.29 14184830 432000 83.14 15253854 431807 86.04 10003985 431807 82.58 10433262 433000 92.47 15277741 432983 120.21 10236442 432983 132.88 9238424 444000 137.16 13640561 444546 127.63 10779015 445226 120.81 11181446 446000 140.68 13259805 445672 132.71 17259734 445672 121.91 16793127 448000 108.86 14132280 447825 117.89 12827745 447825 127.13 12779695 449000 156.34 12854487 448837 165.63 14174423 448837 174.3 10367260 451000 179.51 13658100 451004 164.18 11176358 451616 171.91 13148095 452000 179.08 13175516 452043 200.68 13677186 452043 202.21 13005667 454000 200.57 12628983 453935 220.28 17248617 453935 212.76 12834491 455000 215.21 12223185 454754 214.93 10497537 454754 191.13 10098074 455000 172.84 11363418 454551 263.83 7736797 454967 263.9 8372531 455000 267.4 14536561 455243 250.79 10663668 455243 269.71 9394212 457000 278.67 11036007 456884 303.88 10443426 456884 286.11 12366043 458000 318.56 9633022 457734 362.5 7965331 457734 390.74 8202590 459000 398.6 9255796 459265 356.07 7182660 459894 362.76 7790153 460000 332.45 7461680 460167 302.11 5747041 460167 305.91 5566350 462000 329.27 7327822 462036 318.44 5139717 462036 339.54 8609490 463000 325.14 8533427 463006 300.92 5230103 463006 335.4 6287260 463006 310.36 2010 2010 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

If a force of P = 100 N is applied to the handle of the toggle clamp, determine the horizontal clamping force NE that the clamp exerts on the smooth wooden block at E. 60 mm 50 mm 160 mm 75 mm

Your customer asks you to estimate the systematic risk of Microsoft securities . You have collected the data, such as monthly stock prices, risk-free rate, market returns. Using the data, calculate...

Assume that you recently graduated and landed a job as a financial planner with Cicero Services, an investment advisory company. Your first client recently inherited some assets and has asked you to...

1. First download into Excel the monthly price data for your company and the S&P 500 Index over the 5-year period from June 1, 2008 to May 31, 2013 using the instructions outlined above. Using the...

i need help with how to insert it as an excel format, thank you. CAPM \& Stock Valuation Project The estimation of company betas is normally brushed over in many introductory finance texts. This...

Only need to answer 6,7 and 8 Part I: Beta and Returns Estimation The estimation of betas for firms is normally brushed over in many introductory finance texts. This often leads students to view beta...

Data case 2 Econ 670 Show all your work to receive full credit. Completed assignments will include an Excel file. Please use one sheet for each question. Include your answer for Q7 (although done in...

HI, Need assistance with this data case. It does not has to be every single question, any help is much appreciated. Data case 2 Econ 670 Show all your work to receive full credit. Completed...

I need help with this data set, thank you! Data case 2 Econ 670 Show all your work to receive full credit. Completed assignments will include an Excel file. Please use one sheet for each question....

You have recently founded a consulting firm in the domain of Operational Excellence (OPEX) for Small and medium-sized enterprises (SMEs), You have decided to send an advertisement of your firm to an...

With a raise from his employer, an investment firm, Seyed Abdullah, 31, is inspired to look for a new home. He has come to you for help. Financially he is fairly secure, but he is also very averse to...

Item3 10 points eBookPrintReferencesCheck my workCheck My Work button is now enabledItem 3 On May 6, Jim Ryan borrowed $14,000 from Lane Bank at 7.5% interest. Jim plans to repay the loan on March...

A company is preparing completing their Cash Budget. The following data has been prepared for cash receipts and payments. January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash...