08problem
3/22/2010 7:10
12/14/2005
Chapter 8.
Solution to End-of-Chapter Comprehensive/Spreadsheet Problem
Problem 8-22
Bartman Industries' and Reynolds Inc.'s stock prices and dividends, along with the Winslow 5000 Index, are shown
below for the period 2000-2005.
The Winslow 5000 data are adjusted to include dividends.
a.
Use the data to calculate annual rates of return for Bartman, Reynolds, and the Winslow 5000 Index, and then calculate
each entity's average return over the five-year period.
(Hint: 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 2000 because you do not have 1999 data.)
Data as given in the problem are shown below:
Bartman Industries
Reynolds Incorporated
Winslow 5000
Year
Stock Price
Dividend
Stock Price
Dividend Includes Divs.
2005
$17.250
$1.150
$48.750
$3.000
11,663.98
2004
14.750
1.060
52.300
2.900
8,785.70
2003
16.500
1.000
48.750
2.750
8,679.98
2002
10.750
0.950
57.250
2.500
6,434.03
2001
11.375
0.900
60.000
2.250
5,602.28
2000
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 for 2001-2005:
Bartman
Reynolds
Index
2005
24.7%
-1.1%
32.8%
2004
-4.2%
13.2%
1.2%
2003
62.8%
-10.0%
34.9%
2002
2.9%
-0.4%
14.8%
2001
61.0%
11.7%
19.0%
Avg Returns
29.4%
2.7%
20.6%
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 this cell to put the formula in the other 2 cells.
b.
Calculate the standard deviations of the returns for Bartman, Reynolds, and the Wiinslow 5000.
(Hint:
Use the sample
We will use the function wizard to calculate the standard deviations.