Q6: Calculation of ABC stock's beta. Below are 16 monthly ·percentage returns of ABC stock and...

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Q6: Calculation of ABC stock's beta. Below are 16 monthly·percentage returns of ABC stock and of the index.
Calculation of Beta Column1 Column2
Month ABC stock return Index return
1 -13.38 2.52
2 16.79 5.45
3 -1.67 0.76
4 -3.46 2.36
5 10.22 8.56
6 7.13 8.67
7 6.71 10.8
8 7.84 3.33
9 2.15 -5.07
10 7.95 7.1
11 -8.05 -11.57
12 7.68 4.65
13 4.75 14.59
14 7.55 2.66
15 -2.36 3.81
16 4.98 7.99
a. Calculate the sample variances and sample standard deviationsof the stock and of the index.
b. Calculate the sample covariance of ABC stock returns and the.index returns.
c. What is the sensitivity of the ABC stock to the index return, orin other words what is the beta of ABC stock?
d. You are considering a risky investment project whose riskprofile is similar to the risk of ABC stock If the risk free rateis 2% and risk premium is 6%, what is the discount rate to use forthis investment project?
e. Calculate the residual return of ABC stock by using thefollowing equation: e(i)=ABC return(i)-beta*index return(i), i=1,2,... 16. You should use the beta value in the answer to the question(c). What is the covariance· of the residual return of ABC stockand the index return?
f. Calculate the R"2 of the regression. What is the coefficient ofcorrelation between ABC stock and the index?

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MonthABC stock returnIndex returnResidual See Answer

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Q6: Calculation of ABC stock's beta. Below are 16 monthly·percentage returns of ABC stock and of the index.Calculation of BetaColumn1Column2MonthABC stock returnIndex return1-13.382.52216.795.453-1.670.764-3.462.36510.228.5667.138.6776.7110.887.843.3392.15-5.07107.957.111-8.05-11.57127.684.65134.7514.59147.552.6615-2.363.81164.987.99a. Calculate the sample variances and sample standard deviationsof the stock and of the index.b. Calculate the sample covariance of ABC stock returns and the.index returns.c. What is the sensitivity of the ABC stock to the index return, orin other words what is the beta of ABC stock?d. You are considering a risky investment project whose riskprofile is similar to the risk of ABC stock If the risk free rateis 2% and risk premium is 6%, what is the discount rate to use forthis investment project?e. Calculate the residual return of ABC stock by using thefollowing equation: e(i)=ABC return(i)-beta*index return(i), i=1,2,... 16. You should use the beta value in the answer to the question(c). What is the covariance· of the residual return of ABC stockand the index return?f. Calculate the R"2 of the regression. What is the coefficient ofcorrelation between ABC stock and the index?

Calculation of Beta	Column1	Column2
Month	ABC stock return	Index return
1	-13.38	2.52
2	16.79	5.45
3	-1.67	0.76
4	-3.46	2.36
5	10.22	8.56
6	7.13	8.67
7	6.71	10.8
8	7.84	3.33
9	2.15	-5.07
10	7.95	7.1
11	-8.05	-11.57
12	7.68	4.65
13	4.75	14.59
14	7.55	2.66
15	-2.36	3.81
16	4.98	7.99