corporate finance

MBA 6050

Equity Tracking and Analysis Project

Instructions to Calculate Beta

Today is August 31, 2020, and you have just started your new job with a financial planning firm. In addition to studying for all your license exams, you have been asked to review a portion of a client’s stock portfolio to determine the risk/return profiles of 12 stocks in the portfolio. Unfortunately, your small firm cannot afford the expensive databases that would provide all this information with a few simple keystrokes, but that’s why they hired you. Specifically, you have been asked to determine the monthly average returns and standard deviations for the 12 stocks for the past five years.

The stocks (with their symbols in parentheses) are:

· Your Two stock and,

· S&P 500 index

1. Collect price information for each stock from Yahoo Finance (finance.yahoo.com) as follows:

a. Enter the stock symbol. On the page for that stock, click “Historical Data”.

b. b. For the time period, enter the “start date” as August, 2015, and the “end date” as August 31, 2020, to cover the five-year period. Choose the monthly frequency.

c. After hitting Apply click “Download Data.”

d. Open the downloaded data in an Excel spreadsheet. Delete all the columns except the date and the adjusted close. Label the adjusted close column with the name of the stock.

e. e. Enter the next stock symbol in the main search box and search for the next stock. Repeat the above steps and download the historical price data for the new stock.

f. Make sure you use the same dates as before and you select monthly data. Open the new data and copy the adjusted close data into the earlier spreadsheet. Label the adjusted close column with the name of the stock. Make sure the first and last prices are in the same rows as the first stock and make sure they are lined up correctly.

g. Do the same for the remaining stocks (S&P 500).

2. Convert these prices to monthly returns as the percentage change in the monthly prices. (Hint: Create a separate worksheet within the Excel file.) Note that to compute a return for each month, you need a beginning and ending price, so you will not be able to compute the return for the first month.

3. Calculate Beta using excel instructions in screen shot. See Using Excel below.

4. Find return for your stocks using CAPM.

a. Find a risk free rate to use. You will need to look up a treasury rate to use (t-bills, t-bond, you decide which one is your estimate of risk-free rate. In your write-up indicate why you choose the one you did.

b. For Market Return Premium Use 6%

5. Include the output from your excel as appendix.