142 0006724 0020164 totals 031 049 sums 0155160

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0.142 0.006724 0.020164 Totals 0.31 0.49 Sums 0.155160 0.231680 Means 6.20% 0.098 Variance 0.057920 Std deviation 0.000000 0.2406657 variance a. Calculate the expected return for each stock over the 5-year period. please refer to the table above b. Calculate the variance for stock A. c. Calculate the standard deviation of the expected return for Stock A. You have been given the following sample data, showing average historical returns two stocks, over the period 2007 to 2011: Deviation j R(A) - R(mean A) Deviation k R(B) - R(mean B)
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d. Calculate the variance for stock B e. Calculate the standard deviation of the expected return for stock B. f. Calculate the expected return for a portfolio of Stock A (60%) and Stock B (40%) we g.
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h. What do the results for the expected returns and standard deviations over the 5-yea i. If you were an investor that did not like taking high risks, which stock would you pre If the distributi on of the expecte d returns is approxi mately normal, calculat e the range of expecte d returns for each stock (i.e.+ or – one Std Dev about the mean expecte d return).
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j. Calculate the covariance between stocks A and B k. Calculate the correlation coefficient for stocks A and B. l. Interpret what the correlation coefficient is telling you about the relationship between 2 Suppose the expected returns and standard deviations of two stocks were: Stock A: E(R) = 9%, standard deviation = 36% Stock B: E(R) = 15%, standard deviation = 62% a) Calculate the expected return of a portfolio that is composed of 35% of stock A and
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b) Calculate the standard deviation of this portfolio when the correlation coefficient bet c) Calculate the standard deviation of this portfolio (same weights in each stock) when d) How does changes in the correlation between the returns on A and B affect the stan 3 Refer to the table of data below and answer the questions that follow: Dev A Dev B Bear 0.25 -0.02 0.034 -0.02 0.034 Normal 0.6 0.138 0.062 0.138 0.062 Bull 0.15 0.218 0.092 0.218 0.092 a) Dev A sq Calculate the expected return of each stock 0.0004 0.019044 0.047524 Economic State Probability of Economic State Return on Stock J Return on Stock K
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b) If a portfolio was created with from 30% of stock J and 70% of stock K, what is the e c) Calculate the standard deviation of each stock d) Calculate the covariance between the two stocks e) Calculate the correlation coefficient between the two stocks f) What is the portfolio standard deviation?
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for each of
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eightings.
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ar sample, for each stock tell you? efer and why?
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n stocks A and B. 65% of stock B.
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tween the returns is 0.5 n the correlation coefficient is now -0.5. ndard deviation of the portfolio? Dev B sq Dev A sq*pr Dev B sq*pr Dev A*Dev B*Pr 0.001156 0.0001 0.000289 -0.00017 0.003844 0.0114264 0.0023064 0.0051336 0.008464 0.0071286 0.0012696 0.0030084
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Var 0.018655 0.003865 Std Dev 0.1365833 0.06217 Coviariance 0.007972 Correclation 0.93884719748
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Section 5: Basic Firm Valuation 2018 Free cash flow $500,000,000.00 WACC to be calculated from extradata Constant growth rate in next 5 years 6% Long term growth rate after 5 years 3% Corporate tax rate 28% = 6% (1 – 0.28) = 4.32% = 10% [assuming Preference Dividend will be paid at end of Year 1] = (4.32% X 50%) + (12.5% X 40%) + (10% X 10%) 8.16% calculation pf discounted cash flows of the year millions Year 2018 2019 2020 2021 2022 Free Cashflows $530.00 561.80 595.51 631.24 669.11 $0.925 0.855 0.790 0.731 0.676 Present Value 490.01 480.23 470.64 461.24 452.03 calculation of terminal value Present Value of Cash Flows at end of Year 5 = $ 452.03 millions
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