6-16 (Expected return, standard deviation, and the Capital Asset Pricing Model)
ID: 2774093 • Letter: 6
Question
6-16 (Expected return, standard deviation, and the Capital Asset Pricing Model) Below you have been provided the prices for Merck and the S&P 500 Index.
Merck
S&P 500 Index
2011
June
$32.27
$1320.64
July
32.75
1292.28
August
30.87
1218.89
September
29.49
1131.42
October
31.83
1253.30
November
29.59
1246.96
December
30.33
1257.60
2012
January
31.60
1312.41
February
35.74
1356.68
March
36.90
1408.47
April
41.02
1397.91
May
39.19
1310.33
June
42.50
1355.69
Calculate the monthly holding returns for Merck and the S&P 500 Index.
What are the average monthly returns and standard deviations for both?
6-16 (Expected return, standard deviation, and the Capital Asset Pricing Model) Below you have been provided the prices for Merck and the S&P 500 Index. Merck S&P 500 Index 2011 June $32.27 $1320.64 July 32.75 1292.28 August 30.87 1218.89 September 29.49 1131.42 October 31.83 1253.30 November 29.59 1246.96 December 30.33 1257.60 2012 January 31.60 1312.41 February 35.74 1356.68 March 36.90 1408.47 April 41.02 1397.91 May 39.19 1310.33 June 42.50 1355.69 a. Calculate the monthly holding returns for Merck and the S&P 500 Index. b. What are the average monthly returns and standard deviations for both?
Merck
S&P 500 Index
2011
June
$32.27
$1320.64
July
32.75
1292.28
August
30.87
1218.89
September
29.49
1131.42
October
31.83
1253.30
November
29.59
1246.96
December
30.33
1257.60
2012
January
31.60
1312.41
February
35.74
1356.68
March
36.90
1408.47
April
41.02
1397.91
May
39.19
1310.33
June
42.50
1355.69
Explanation / Answer
Standrad deviation is calculated using STDEV function in excel.
Month Merck value Merck monthly % S&P value S&P monthly % June $32.27 $1,320.64 July 32.75 1.5% 1292.28 -2.1% August 30.87 -5.7% 1218.89 -5.7% September 29.49 -4.5% 1131.42 -7.2% October 31.83 7.9% 1253.3 10.8% November 29.59 -7.0% 1246.96 -0.5% December 30.33 2.5% 1257.6 0.9% January 31.6 4.2% 1312.41 4.4% February 35.74 13.1% 1356.68 3.4% March 36.9 3.2% 1408.47 3.8% April 41.02 11.2% 1397.91 -0.7% May 39.19 -4.5% 1310.33 -6.3% June 42.5 8.4% 1355.69 3.5% Average monthly return 2.5% 0.3% standard deviation 6.8% 5.2%Related Questions
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