Case3_Writeup_Hooda_Lin - Corporate Finance Case#3 Alex...

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Corporate Finance Case #3 Alex Sharpe’s Portfolio Aarsheya Hooda and Terry Lin 1. Estimate and compare the returns and variability (i.e., returns SD) for Reynolds and Hasbro with that of the S&P-500 index. Which stock/portfolio appears to be the riskiest? You can do this on a monthly basis. Reynolds has a standard deviation of 9.37%, which is higher than Hasbro’s and the market standard deviation of 8.12% and 3.60% respectively, so Reynolds is the riskier stock. 2. Suppose Sharpe’s position had been 99% of equity funds invested in the S&P-500, and one percent in either Reynolds or Hasbro. Estimate the resulting portfolio expected returns and SD of returns for each of these two possible portfolios. For a portfolio with 99% S&P and 1% Reynolds, expected returns are 7.05% with a 12.68% standard deviation. For a portfolio with 99% S&P and 1% Hasbro, expected returns are 6.97% with a 12.63% standard deviation. 3. Using the S&P-500 as a proxy for the market, estimate the beta of each of the two
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