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FIN500: Principles of Finance Module 6 Critical Thinking Assignment The Meaning and Measurement of Risk and Return Problem 6.1. Rate of Return. A stock currently is paying 6% return. Calculate the following investment's: a. Expected return b. Variance C. Standard deviation. DATA Probability Return 0.16 -0.06 0.24 0.25 0.32 0.35 0.50 0.40 Problem 6.2. Holding-Period Returns Calculate the following investment's holding-period return. DATA TIME STOCK PRICE 1 15 2. 17.5 3 19 4 22 Problem 6.3. Holding Period SAR Gain and Return. Calculate the following investment's holding period gain and return DATA Problem 6.2. Holding-Period Returns Calculate the following investment's holding-period return. DATA TIME STOCK PRICE 1 15 2 17.5 3 19 4 22 Problem 6.3. Holding Period SAR Gain and Return. Calculate the following investment's holding-period gain and return DATA Purchase price 41.75 Selling price 45.2 Shares sold 25 Purchase price 41.75 Selling price 45.2 Shares sold 25 Problem 6.4. Capital Asset Pricing Model Based on the data below, calculate the required rate of return for each stock. DATA Stock Beta A 0.75 B 0.5 1.6 Risk-free rate 0.06 Market rate 0.15 Problem 6.5. Security Market Line Based on data below, calculate portfolio's return and beta. Stock % of Portfolio Beta Expected Return 1 0.20 0.65 0.17 2 0.50 0.80 0.22 3 0.30 1.70 0.19 100% Risk-free rate 0.06 Market rate 0.15 Problem 6.6. Required Rate of Return Using CAPM Calculate the required rate of return by using CAPM based on data below. DATA Risk-free rate = 0.06 Market Risk Premium 0.15 Beta = 1.32 Problem 6.7. Expected Return, Standard Deviation Calculate average rate of returns and standard deviation of the Coca Cola stock price and the Dow Jones Index, based on data below. DATA Part Solution DATA Part Solution (Current return/Previous return)-1 (Current return/Previous return)-1 Month Returns Coca Cola Stock Prices Returns Dow Jones Index Prices Jan-20 58.40 28256.03 Feb-20 53.49 -0.08 25409.36 -0.10 Mar-20 44.25 -0.17 21917.16 -0.14 Apr-20 45.89 0.04 24345.72 0.11 May-20 46.68 0.02 25383.11 0.04 Jun-20 44.68 -0.04 25812.88 0.02 Jul-20 47.24 0.06 26428.32 0.02 Aug-20 49.53 0.05 28430.05 0.08 Sep-20 49.37 0.00 27781.7 -0.02 Oct-20 48.06 -0.03 26501.6 -0.05 Problem 6.7. Expected Return, Standard Deviation Calculate average rate of returns and standard deviation of the Coca Cola stock price and the Dow Jones Index, based on data below. DATA Part Solution DATA Part Solution (Current return/Previous return)-1 (Current return/Previous return)-1 Month Returns Returns Coca Cola Stock Prices Dow Jones Index Prices Jan-20 58.40 28256.03 Feb-20 53.49 -0.08 25409.36 -0.10 Mar-20 44.25 -0.17 21917.16 -0.14 Apr-20 45.89 0.04 24345.72 0.11 May-20 46.68 0.02 25383.11 0.04 Jun-20 44.68 -0.04 25812.88 0.02 Jul-20 47.24 0.06 26428.32 0.02 Aug-20 49.53 0.05 28430.05 0.08 Sep-20 49.37 0.00 27781.7 -0.02 Oct-20 48.06 -0.03 26501.6 -0.05 Nov-20 51.60 0.07 29638.64 0.12 Dec-20 54.44 0.06 30606.48 0.03

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