# Average Monthly Return for Stock Assignment | Homework For You

Can you show the work for number 5 and 6 and what it should look like in excel?

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1. First download into Excel the APPLE (AAPL), Microsoft (MSFT), and S&P 500 Stock Index (^GSPC) monthly price data for the 5-year period from the Feb. 1, 2015 to Jan. 31, 2020 using the instructions outlined above. Using the Open and Close price data for each month (the date given is the first trading day for that month: i.e. the open and close for the month) to calculate the monthly percentage holding period returns for each stock and index where each month’s Open price is the beginning of the month price and each month’s Close price is the end of the month price. You can get rid of the other data provided for each month. In addition, you will need to include dividend payments for each stock to calculate monthly returns for the months that they made a dividend payment (the index doesn’t have dividend payments). For example, September’s monthly return is (Sept Close – Sept. Open + any Sept Div)/Sept Open. You should have 60 monthly returns for each stock and index from Feb. 1, 2015 to Jan. 31, 2020. Helpful Hint: I strongly urge creating a table of the appropriate opening & closing prices and dividends for each stock along with opening and closing prices for the S&P 500 Index on a separate worksheet and then do your calculations on this “fresh” worksheet.

2. What is the average monthly return for each stock and the S&P 500 index over the entire time period? Convert the average monthly return for each stock and index into an APR (annualized rate) by multiplying your monthly average for each stock by 12. Please convert your answers to percentages

3. Calculate the (population) standard deviation of monthly returns for each stock and the index using Excel.

4. Now calculate the beta for each stock using Excel’s Slope or Linest function to use estimate the slope of the linear regression line, which is beta. Use the S&P 500 index as the market portfolio in finding beta.

5. Now use the CAPM/SML Equation to estimate each stock’s required return. Use 10% as the required market return and the recent 1-year Treasury rate of 1% as the risk-free rate. Would you recommend buying APPLE and/or Microsoft if your APR average for each stock from #2 is your expected return? Explain your answer.

6. Construct a graph of the Security Market Line given by the parameters in #5. Point out the SML returns you calculated in #5 on your SML. Also, find and plot APPLE’s and Microsoft’s expected returns from the information given below gathered from their recent Yahoo Finance stock quotes against each stock’s beta on your SML graph. Would you recommend buying APPLE and/or Microsoft based on this information? Explain your answers. Note: you are evaluating each stock individually, not in comparison in one another.

 Stock Apple Microsoft Current Price 292.92 166.27 Estimated Price 1 year from now 332.91 194.19 Annual Expected Dividend (D1) 3.08 2.04

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