FIN 5130 Mini-case Assignment

Kindly see attached assignment with further instructions;

Solve for the following:

A. Calculate the average, variance and standard deviation for the returns of each

series. Comment on the statistics.

B. Calculate the covariance and the correlation coefficient between each of the return

series (there should be a total of three correlations and three covariances). Comment

on the statistics.

C. If you were to form a portfolio that had 50% of the S&P 500 Index and 50% of

Merck, what would be the average returns and the standard deviation of that

portfolio? (Ignore the fact that both Merck may already be included in the S&P 500)

D. If you were to add Nike to your portfolio so that you now had 33% S&P 500, 33%

Merck, and 34% Nike, what would be the new average returns and standard

deviation? (Ignore the fact that both Nike and Merck may already be included in the

S&P 500) Is Nike a good addition to your portfolio? Why do you think so?

E. Determine MRK’s beta.

F. Determine Nike’s beta.