Finance Assignment - Excel
Risk and Return Assignment Akamai Technologies (AKAM)Whirlpool Corporation (WHR)SP500 Index YearStock PriceDividendStock PriceDividendIncludes Dividends 2021$ 102.83$ - 0$ 225.30$ 4.924,019.87 2020$ 91.60$ - 0$ 80.60$ 4.922,470.50 2019$ 72.73$ - 0$ 134.47$ 4.842,867.19 2018$ 69.25$ - 0$ 150.46$ 4.802,581.88 2017$ 59.30$ - 0$ 170.72$ 4.402,358.54 2016$ 55.63$ - 0$ 182.98$ 3.962,066.13 FIN201 Spring 2021 - Risk and Returns Exercise Due Thursday, April 15 by 10:00 p.m. Akamai Technologies's and Whirlpool Corporation's stock prices and dividends, along with the S&P500 Index, are shown here for the period 2016-2021. The S&P500 Index is adjusted to include dividends. Note that the specific dates within each year are as of April 1 so the interval between each date is still one year. A. Use the data to calculate annual rates of return for Akamai, Whirlpool and the S&P500 Index. Then calculate each entity's average return over the 5 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 included in the S&P 500 Index. Also, you cannot calculate the rate of return for 2016 because you do not have 2015 data. B. Calculate the standard deviations of the returns for the three entities. You can use the sample standard deviation formula, Equation 8.2a in Chapter 8, which corresponds to the STDEV.P function in Excel. C. Calculate the Coefficients of Variation for Akamai, Whirlpool, and the S&P500 Index. D. Assume the risk-free rate during this time was 2.0%. Calcuate the Sharpe ratios for Akamai, Whirlpool, and the Index over this period using their average returns. Note that the Return on the Market is the average return on the SP500 Index. E. Estimate Akamai's and Whirlpool's betas by running regressions of their returns against the index's returns. (Refer to Web Appendix 8A). F. Assume that the risk-free rate on long term Treausry bonds is 3.0%. Assume also that the average annual return on the S&P500 is not a good estimate of the market's required return, it is too high. Use 10% as the expected return on the market. Use the SML equation to calculate the required returns for the two companies. G. If you formed a portfolio that comprised 50% Akamai and 50% Whirlpool, what would the portfolio's beta and required return be? H. Suppose that an investor wants to include Akamai's stock in a portfolio. Stocks A, B,, and C are currently in the portfolio, and their betas are 0.769, 0.985, and 1.423 respectively. Calculate the new portfolio's required return if it consists of 25% of Akamai, 15% of Stock A, 40% of Stock B, and 20% of Stock C. Answers Akamai Technologies (AKAM)Whirlpool Corporation (WHR)SP500 Index YearStock PriceDividendStock PriceDividendIncludes Dividends 2021$ 102.83$ - 0$ 225.30$ 4.924,019.87 2020$ 91.60$ - 0$ 80.60$ 4.922,470.50 2019$ 72.73$ - 0$ 134.47$ 4.842,867.19 2018$ 69.25$ - 0$ 150.46$ 4.802,581.88 2017$ 59.30$ - 0$ 170.72$ 4.402,358.54 2016$ 55.63$ - 0$ 182.98$ 3.962,066.13 Question A. Annual and average rates of return. Question B. Standard deviations (σ) of each entity. Question C. Coefficients of Variation (CV) Question D. Sharpe ratios. Question E. Estimate betas Question F. Required returns using SML equation. Question G. 50/50 portfolio beta and required return Question H. New Portfolio required return