Graded Home Work #1 FIN 352 Investments, Fall 2019 Dr. ZarBabal Do everything in Excel, and upload your Excel spreadsheet to blackboard. Please ask a classmate if you are not sure how to upload the...

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Graded Home Work #1 FIN 352 Investments, Fall 2019 Dr. ZarBabal Do everything in Excel, and upload your Excel spreadsheet to blackboard. Please ask a classmate if you are not sure how to upload the assignment to blackboard before assignment is due. Late assignments will not be accepted, please be sure you upload the correct file. 1) You have $12,000 to invest today. Based on the following table: a. What is the expected risk premium for the stock market over the next year? b. What is the zero coupon yield? c. What is the Sharpe ratio expected to be over the next year? Invest in Stocks Probability Expected future portfolio value in one year Expected Dividend or coupon in one year 0.08 $10,000 $0 0.45 $13,000 $500 0.35 $14,000 $1,000 0.12 $18,000 $1,000 Invest in 1yr Zero coupon bond 1 $12,360 $0 2) Use data downloaded from StockTrak to calculate the following for the last 5 years (or 60 months): a) Calculate the gross geometric average (aka TV) return on the S&P 500 price level (column B) since 1871, using the monthly data. b) What is the monthly geometric average return? c) What is the correlation coefficient between the S&P price and the 10 year US bond yield using monthly data? What is your economic explanation for your results? d) What is the arithmetic average return on the S&P 500, adjusted for dividends and stock splits? e) Extra Credit: What is the average real return on the S&P 500, including dividends? What does this say about inflation and stock market returns? 3) Use data downloaded from StockTrak to calculate the following for the last 5 years, with the S&P 500 Index as the Market Benchmark, and the : a) What is the Sharpe Ratio of the S&P 500 Index, using Annual data for the last 5 years? b) What is the Sharpe Ratio of GE, using Annual data for the last 5 years? c) What is the Sharpe Ratio of GLD Gold ETF, using Annual data for the last 5 years?
fin-352-hw-1-returns-1-fjhvp0o1.docx qm-pricehistory-current-nrhwyoq0.csv
Answered Same DaySep 23, 2021

Answer To: Graded Home Work #1 FIN 352 Investments, Fall 2019 Dr. ZarBabal Do everything in Excel, and upload...

Pooja answered on Sep 24 2021
136 Votes
1
        Invest in Stocks    Probability    Expected future portfolio value in one year    Expected Dividend or coupon in one year
            0.08    10000    0
            0.45    13000    500
            0.35    14000    1000
            0.12    18000    1000
        Invest in 1yr Zero coupon bond    1    12360    0
    a)
        Risk premium is extra premium earned from investing in stock market over the risk free rate.
        Rsik premium =        Rm - Rf
        where,    Rm =    Market return over next year
            Rf =    Risk free rate
        Rp =    sum [ probability stock i * [(Future value of stock I + dividend earned for I )/ Invested Value of i -1] ; i=1,2,…,n
        Rp =    20.04%
        Rf =    0.03
        Rp = Rf + Beta ( Rm - Rf)
        (Rp - Rf)/beta + Rf = Rm
        Rm =    20.04%
    b)
        Risk free bond yield =    3%
    c)
        Sharpe ratio = (Rp- Rf) / Standard deviation of market
        Sharpe ratio    0.17
         -> sub-optimal
qm-pricehistory-current-nrhwyoq
    Date    Open    High    Low    Close    VWAP    Unadj. Open    Unadj. High    Unadj. Low    Unadj. Close    Unadj. VWAP    Volume    Change Percent    Change    Trade Value    Total Trades    Total...
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