You are working for the CFO of AT&T. You collect stockreturn data from 1995 to 2016 (23 years of data): average return:9.9%; standard deviation: 23.1%; market average excess return:8.5%; market SD: 14.5%; average risk-free rate: 2.3%.
1. What was AT&T’s Sharpe ratio (the ratio of average excessreturn to standard deviation) over the period? What was themarket’s Sharpe ratio?
2. What is the standard error of the sample average AT&Treturn? Provide a 95% and 99% confidence interval.
3. You also look at the AT&T beta which is 0.4. IsAT&T’s beta above or below average?
4. If, over the next week, the market goes up by 2%, what do youexpect the AT&T stock return to be?
