SCENARIO 3-11 Given below are the closing prices for the Dow Jones Industrial Av
ID: 3063491 • Letter: S
Question
SCENARIO 3-11 Given below are the closing prices for the Dow Jones Industrial Average (DJIA) and the Standard & Poor's (S&P;) 500 Index over a 10-week period sometime in the past. Dow 10,42 10,11 Jones 10,59 11,21 10,93 11,13 10,31 23346 10,47 019,862 59 15) Referring to Scenario 3-11, what is the sample covariance between the 15) DJIA and the S&P; 500 index? 16) Referring to Scenario 3-11, what is the sample correlation coefficient 16) between the DJIA and the S&P; 500 index? MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 17) Referring to Scenario 3-11, how will you classify the linear relationship 17 between the DJIA and the S&P; 500 index? A) Weak C) No relationship B) Moderate D) Strong 18) Referring to Scenario 3-11, for the week when the DJIA is high, you will 18) expect the S&P; index in that week to A) have no relationship with the DJIA value B) be high. C) be low D) be about the same value as the DJIA 19) Referring to Scenario 3-11, you will expect an increase in the DJIA to be 19) associated with A) no predictable change in the DJIA B) no predictable change in the S&P; 500 index C) an increase in the S&P; 500 index D) a decrease in the S&P; 500 index.Explanation / Answer
In this question I am using Excel function for Covariance and Correlation
Inserting 'Dow jones' data into Excel as A1 : A10
Inserting 'S&P 500" data into Excel as B1 : B10
Now
15) Covariance =COVAR(A1:A10,B1:B10) = 28435.26
16) Correlation =CORREL(A1:A10,B1:B10) = 0.92741
Multiple choice questions
17) Strong, Because Correlation value is very close to +1
18) High, Because correlation is positive strong, in otherwords same direction or positive association between the variables
19) an increase in the S&P 500 index,
since both must be either increased or decreased, because it is positived direction.
Please let me know if you need hand written calculations. Thanks
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