FIN435 Class Web Page, Spring '18
Instructor: Maggie Foley
Business Finance Online, an interactive learning tool for the Corporate Finance Student https://www.zenwealth.com/BusinessFinanceOnline/index.htm (could be very helpful)
Weekly SCHEDULE, LINKS, FILES and Questions
Coverage, HW, Supplements
WSJ Papers for Discussion in following week
Daily earning announcement: http://www.zacks.com/earnings/earnings-calendar
IPO schedule: http://www.marketwatch.com/tools/ipo-calendar
For class discussion: What are the 6 signs? Which one is the hardest one to catch? Which one is the most important one?
Chapter 3 Financial Statement Analysis
Chapter 3 Case study (first case study, due on 4/5)
one’s Class Videos (FYI)
Capital expenditure = increases in NFA + depreciation
Or, capital expenditure = increases in GFA
All companies, foreign and domestic, are required to file registration statements, periodic reports, and other forms electronically through EDGAR. Q3: Free cash flow: concept and equation. What is FCF? Why is it important?
1. Go to EDGAR online
2. Search AAPL
3. Search financial statement of AAPL in 2017, 2016, 2015, and 2014.
Chapter 4 Ratio Analysis
Chapter 4 case study (second case study, due on 4/5)
HW of chapters 3, 4 (due on 4/5)
1. Firm A's sales last year = $280,000, net income = $23,000. What was its profit margin? (8.21%)
2. Firm A’s total assets = $415,000 and its net income = $32,750. What was its return on total assets (ROA)?(7.89%)
3. Firm A’s total common equity = $405,000 and its net income = $70,000. What was its ROE? (17.28%)
4. Firm A’s stock price at the end of last year = $23.50 and its earnings per share for the year = $1.30. What was its P/E ratio? (18.08)
5. Meyer Inc's assets are $625,000, and its total debt outstanding is $185,000. The new CFO wants to establish a debt/assets ratio of 55%. The size of the firm does not change. How much debt must the company add or subtract to achieve the target debt ratio? ($158,750)
6. Chang Corp. has $375,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $595,000, and its net income was $25,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15.0%. What profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant? (9.45%)
7. A firm has $300 in inventory, $600 in fixed assets, $200 in accounts receivable, $100 in accounts payable, and $50 in cash. What is the amount of the current assets? ($550)
8. Art's Boutique has sales of $640,000 and costs of $480,000. Interest expense is $40,000 and depreciation is $60,000. The tax rate is 34%. What is the net income? ( $39,600)
9. Use the following information to prepare the cash flow statement in 2008 of Nabors, Inc. Calculate FCF.
10. Read the following article. Summarize what is going on under each situation. Where are the auditors? Are they completely ineffective? Are they on the side with the employers? What is your view?
SEC Announces Financial Fraud Cases
FOR IMMEDIATE RELEASE
The Securities and Exchange Commission today announced a pair of financial fraud cases against companies and then-executives accused of various accounting failures that left investors without accurate depictions of company finances.
In one case, technology manufacturer Logitech International agreed to pay a $7.5 million penalty for fraudulently inflating its fiscal year 2011 financial results to meet earnings guidance and committing other accounting-related violations during a five-year period. Logitech’s then-controller Michael Doktorczyk and then-director of accounting Sherralyn Bolles agreed to pay penalties of $50,000 and $25,000, respectively, for violations related to Logitech’s warranty accrual accounting and failure to amortize intangibles from an earlier acquisition. The SEC filed a complaint in federal court yesterday against Logitech’s then-chief financial officer Erik Bardman and then-acting controller Jennifer Wolf alleging that they deliberately minimized the write-down of millions of dollars of excess component parts for a product for which Logitech had excess inventory in FY11. For Logitech’s financial statements, the two executives falsely assumed the company would build all of the components into finished products despite their knowledge of contrary facts and events.
In the other case, three then-executives at battery manufacturer Ener1 agreed to pay penalties for the company’s materially overstated revenues and assets for year-end 2010 and overstated assets in the first quarter of 2011. The financial misstatements stemmed from management’s failure to impair investments and receivables related to an electric car manufacturer that was one of its largest customers. Former CEO and chairman of the board Charles L. Gassenheimer, former chief financial officer Jeffrey A. Seidel, and former chief accounting officer Robert R. Kamischke agreed to pay penalties of $100,000, $50,000, and $30,000, respectively.
“We are intensely focused on whether companies and their officers evaluate judgmental accounting issues in good faith and based on GAAP,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. “In these two cases, we allege deficiencies in Ener1’s failure to properly impair assets on its balance sheet and Logitech’s failure to write down the value of its inventory to avoid the financial consequences of disappointing sales.”
In the Ener1 case, the SEC also found that Robert D. Hesselgesser, the engagement partner for PricewaterhouseCoopers LLP’s audit of Ener1’s 2010 financial statements, violated PCAOB and professional auditing standards when he failed to perform sufficient procedures to support his audit conclusions that Ener1 management had appropriately accounted for its assets and revenues. Hesselgesser agreed to be suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies. The SEC’s order permits Hesselgesser to apply for reinstatement after two years.
“Auditors play a critical role regarding the accuracy of financial statements relied upon by investors, and they must be held accountable when they fail to do everything required under professional auditing standards,” said Michael Maloney, Chief Accountant of the SEC’s Division of Enforcement.
In the Logitech case, former CEO Gerald Quindlen was not accused of any misconduct, but has returned $194,487 in incentive-based compensation and stock sale profits received during the period of accounting violations, pursuant to Section 304(a) of the Sarbanes-Oxley Act.
The companies and executives who agreed to settlements neither admitted nor denied the charges.
The SEC’s investigation of Logitech was conducted by Paul Gunson and Matthew Finnegan, and supervised by Douglas McAllister. The litigation is being led by Paul Kisslinger and Kevin Lombardi, and supervised by Bridget Fitzpatrick.
The SEC’s investigation of Ener1 was conducted by Carolyn Winters, Richard Haynes, and Deena Bernstein, and supervised by Douglas McAllister.
Financial Statement Templates
Useful website for stock picks
www.finviz.com (stock screener)
Your career choices with
a finance degree (
Your career choices with a finance degree (Mutual Fund, Retail Banking, Investment Banking, Venture Capital, Hedge Fund, Private Banking…
Week 2, 3
Chapter 6 Interest rate
chapter 6 case study (third case study, due on 4/5)
Week 3’s Class videos:
Part I) https://youtu.be/cysbKa62X5Y
Part 2) https://youtu.be/w05Uo4VsOkc
Part 3) https://youtu.be/cvZ9X0xEDno
Part I: Yield Curve
Yield Curve as of 3/21/2018
Market data website:
http://finra-markets.morningstar.com/BondCenter/Default.jsp (FINRA bond market data)
Market watch on Wall Street Journal has daily yield curve and interest rate information.
Summary of Yield Curve Shapes and Explanations
Normal Yield Curve
Steep Curve – Economy is improving
Inverted Curve – Recession is coming
To become inverted, the yield curve must pass through a period where long-term yields are the same as short-term rates. When that happens the shape will appear to be flat or, more commonly, a little raised in the middle.
Unfortunately, not all flat or humped curves turn into fully inverted curves. Otherwise we'd all get rich plunking our savings down on 30-year bonds the second we saw their yields start falling toward short-term levels.
On the other hand, you shouldn't discount a flat or humped curve just because it doesn't guarantee a coming recession. The odds are still pretty good that economic slowdown and lower interest rates will follow a period of flattening yields.
Part II: interest rate break down
r = r* + IP + DRP + LP + MRP
r = required return on a debt security
r* = real risk-free rate of interest
IP = inflation premium
DRP = default risk premium
LP = liquidity premium
MRP = maturity risk premium
MRPt = 0.1% (t – 1)
DRPt + LPt = Corporate spread * (1.02)(t−1)
Homework of chapter 6 (Due on 4/5)
HW1 The following yields on U.S. Treasury securities were taken from a financial publication:
HW2 You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.5%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:
On the basis of these data, what is the real risk-free rate of return? (answer: 2.25%)
HW3 The real risk-free rate is 3%. Inflation is expected to be 2% this year and 4% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? What is the yield on 3-year Treasury securities?(answer: 5%, 6.33%)
HW4 A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premium on the corporate bond? (answer: 1.5%)
HW5 The real risk-free rate is 3%, and inflation is expected to be 3% for the next 2 years. A 2-year Treasury security yields 6.2%. What is the maturity risk premium for the 2-year security? (answer: 0.2%)
HW6 One-year Treasury securities yield 5%. The market anticipates that 1 year from now, 1-year Treasury securities will yield 6%. If the pure expectations theory is correct, what is the yield today for 2-year Treasury securities? (answer: 5.5%)
For class discussion: why now?
US STOCKS-Wall St sinks on Trump tariffs, interest rate worries
Published 1:35 PM ET Thu, 1 March 2018 Reuters
By Sruthi Shankar and Caroline Valetkevitch
March 1 (Reuters) - U.S. stocks fell sharply on Thursday after President Donald Trump said the United States would impose import tariffs on steel and aluminum, adding fears of a tit-for-tat trade war to growing worries about higher interest rates.
After a confused day of report and counter report, Trump said the U.S. would impose tariffs of 25 percent on steel imports and 10 percent on imported aluminum next week.
That drove shares in U.S. steel producers as much as 12 percent higher but knocked 2 percent or more off heavyweights like Boeing and Caterpillar, who investors worried would face higher raw material costs and trade barriers elsewhere.
New York Federal Reserve President William Dudley also added to the evidence that the U.S. central bank under new chief Jerome Powell would seek to tighten monetary policy with four interest rates rises this year, more than previously expected.
By 13:09 p.m. ET, all the major sectors in the S&P 500 were down in response along with 29 of the 30 components of the Dow Industrial Average.
Overall the Dow lost 343.7 points, or 1.4 percent, the S&P 500 29.03 points, or 1.1 percent and the Nasdaq Composite 77.10 points, or 1.1 percent.
"The bombshell is the announcement about half an hour ago about the proposed tariffs on steel and aluminum industries," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
"It's helping about a dozen stocks in those industries but has raised the specter of trade wars, and trade wars don't help the stock market."
Federal Reserve chair Jerome Powell had earlier given the market a boost by saying in his second round of congressional testimony that the central bank did not see strong evidence of wage inflation or signs of overheating.
Rising inflation and bond yields were the main concerns as Wall Street ended a turbulent February on Wednesday, with the S&P 500 posting its first monthly loss in 11 months.
But it was the tariff issues that was spinning the market lower as the afternoon wore on.
"The risk to imparting these tariffs is that it invites a retaliatory response from our trading partners and particularly China," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. (Additional reporting by Parikshit Mishra in Bengaluru Editing by Patrick Graham)
Questions for discussion: Do you like this round of tariff war? Worry for inflation?
As the Tariff Drama Ends, Interest Rates Take Center Stage (FYI)
| MAR 09, 2018 | 7:53 AM EST
- Max Euwe"Strategy requires thought, tactics require observation."
After a week of choppy action following the announcement of steel and aluminum tariffs by President Trump, the market is resting and trying to determine its next move. The tariff issue isn't over, but Trump backed off from his original harsh position and the market is now higher than when the announcement was first made.
The most notable aspect of the recent trading has been the tenacious dip buying. Market players could hardly wait to plunge in and buy weakness. There was no real fear or worry despite breathless commentary by many pundits about how Trump was creating an economic disaster.
There will be some reverberations as the focus moves to the NAFTA negotiations and possible carve outs for other allies but the market seems ready to dismiss the issue and look ahead to other matters.
The other matters start with news the President Trump will meet with North Korea's Kim Jung Un. Asian markets rallied on this news, but it is having little impact in Europe and the US so far. Understandably, there is plenty of skepticism about the sincerity of this approach but it is an interesting development that does help to ease some concerns.
The more important issue for the market today is likely to be the jobs report that is due at 8.30 am ET. The market has put interest rates on the back burner while it has dealt with the tariff and trade war issues. Bonds have been holding steady since the Jerome Powell Congressional testimony but jobs news has the capacity to heat things up again.
Before the tariff news hit, the market was selling off on hawkish comments by Powell. The expections for interest hikes this year has been increasing but the market hasn't been too concerned about that issue. It was far more worried about playing the 'buy the dip' game on tariff news.
Technically the indices are facing overhead resistance here. Things are slightly overbought after the bounce off the tariff lows and there is resistance around the 50-day simple moving average of the S&P500 at 2740.
The Nasdaq has been outperforming but that momentum slowed a bit as the January highs are lurking. Small caps have been a safe haven during the recent drama but it is increasingly difficult to find setups after a V-shaped move.
Prior to the short volatility blow-up at the beginning of February, the market had little worry or concern about technical overhead. It simply didn't matter as V-shaped bounces powered through the obvious levels. That has changed with two big dips in the past month. The endless upside is not quite as easy as it once appeared. While we still have V-ish inclinations, there is now greater appreciation of the potential for some downside.
I'm holding about 50% cash and have not been finding much to buy the last few days. I'll continue to look for new merchandise but I expect I'll have to be patient while the market figures out what it is going to do next.
We have a flattish open on the way and lots of talk about North Korea which isn't moving the market much. Jobs news is next.
What is interest rates
How interest rates are set
What happens if Fed raise interest rates
Mid Term (week four, take home, due on 4/5/2018)
On blackboard under course introduction!
Chapter 7 Bond Pricing
Case study of chapter 7 (Due on 4/5)
Week 4’s class videos
Part 1 - https://youtu.be/E60i2CxlmnU
Part 2 - https://youtu.be/Ey1jDrs1mXs
Part 3 - https://youtu.be/MgRvp4Y-yaQ
Market data website:
http://finra-markets.morningstar.com/BondCenter/Default.jsp (FINRA bond market data)
Market watch on Wall Street Journal has daily yield curve and bond yield information.
3. Bond Online
Simplified Balance Sheet of WalMart
· What is this “long term debt”?
· Who is the lender of this “long term debt”?
So this long term debt is called bond in the financial market. Where can you find the pricing information and other specifications of the bond issued by WMT?
FINR-A – Bond market information
How Bonds Work (video)
FINRA – Bond market information
WAL-MART STORES INC
1. Find bond sponsored by WalMart (WMT)
just go to www.finra.org, è Investor center è market data è bond è corporate bond
For class discussion:
· Fed has hiked interest rates. So, shall you invest in short term bond or long term bond?
· Which of the three WMT bonds are the most attractive one to you? Why?
· Referring to the price chart of the above bond below, the price was reaching peak in the middle of 2016 and 2012. Why? The price was really low in the middle of 2013. Why? Interest rate is not the reason.
HOMEWORK (Due o n 4/5)
1. AAA firm’ bonds will mature in eight years, and coupon is $65. YTM is 8.2%. Bond’s market value? ($903.04)
2. AAA firm’s bonds’ market value is $1,120, with 15 years maturity and coupon of $85. What is YTM? (7.17%)
3. AAA firm’ bonds market value is $1,050, with six years to maturity and coupon of $75. Current yield? (7.14%)
4. Sadik Inc.'s bonds currently sell for $1,180 and have a par value of $1,000. They pay a $105 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to call (YTC)? (7.74%)
5. Malko Enterprises’ bonds currently sell for $1,050. They have a 6-year maturity, an annual coupon of $75, and a par value of $1,000. What is their current yield? (7.14%)
6. Assume that you are considering the purchase of a 20-year, noncallable bond with an annual coupon rate of 9.5%. The bond has a face value of $1,000, and it makes semiannual interest payments. If you require an 8.4% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? ($1,105.69)
7. Grossnickle Corporation issued 20-year, non-callable, 7.5% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity? ($1,232.15)
8. McCue Inc.'s bonds currently sell for $1,250. They pay a $90 annual coupon, have a 25-year maturity, and a $1,000 par value, but they can be called in 5 years at $1,050. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between this bond's YTM and its YTC? (Subtract the YTC from the YTM; it is possible to get a negative answer.) (2.62%)
9. Taussig Corp.'s bonds currently sell for $1,150. They have a 6.35% annual coupon rate and a 20-year maturity, but they can be called in 5 years at $1,067.50. Assume that n*o costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds? (4.2%)
10. A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 5 years from now? ($930.11)
11. Do a simple study on IHRT. Do you think that over borrowing is the major cause for its failure? You can use finviz.com to gather information. Between 200 – 500 words.
Bond Pricing Formula (FYI)
Bond Pricing Excel Formula
To calculate bond price in EXCEL (annual coupon bond):
Price=abs(pv(yield to maturity, years left to maturity, coupon rate*1000, 1000)
To calculate yield to maturity (annual coupon bond)::
Yield to maturity = rate(years left to maturity, coupon rate *1000, -price, 1000)
To calculate bond price (semi-annual coupon bond):
Price=abs(pv(yield to maturity/2, years left to maturity*2, coupon rate*1000/2, 1000)
To calculate yield to maturity (semi-annual coupon bond):
Yield to maturity = rate(years left to maturity*2, coupon rate *1000/2, -price, 1000)*2
Bond calculation (Thanks to Dr. Lane)
Call Date Call price
iHeartCommunications misses $106 million interest payment on bonds due 2021
iHeartCommunications Inc., which is owned by radio station operator iHeartMedia Inc. IHRT, -9.23% said Thursday its board has decided not to make a $106 million interest payment on 14% senior notes that mature in 2021 as it continues to hold talks with creditors on a debt restructuring. The company will make use of a 30-day grace period under the terms of its borrowing. "The board is considering options as part of its strategy to achieve a comprehensive restructuring of the company's debt," it said in a statement. The notes were trading at 7.50 cents on the dollar, according to trading platform MarketAxess.
IHRT Stock Price https://finance.yahoo.com/quote/ihrt?ltr=1
At close: March 15 3:59PM EDT
For class discussion: How much is the yield to maturity to IHEARTCOMMUNICATION Inc’s bond?
High yield bond is riskier than stocks in general ? Or not?
Treasury Bond Auction Website
What is duration? (not required but useful)
Duration is defined as the weighted average of the present value of the cash flows and is used as a measure of a bond price's response to changes in yield.
If duration = 10 years, then for 1% increase in interest rate, the bond price will drop by 10 times of 1%, which is 10%.
You can calculate duration in excel.
DURATION(settlement, maturity, coupon, yld, frequency, [basis])
How to calculate bond prices using exact
date? (not required but useful)
Use price function in Excel. Returns the price
per $100 face value of a security that pays periodic interest.
PRICE(settlement, maturity, rate, yld, redemption, frequency, [basis])
Calculate bond yield using exact date?(not required but useful)
Use YIELD to calculate bond yield.
redemption, frequency, basis)
Excel yield function video
Risk of Bonds
Bond risk (video)
Bond risk – credit risk (video)
Bond risk – interest rate risk (video)
How to invest in bond market when Fed is hiking interest rates? (Videos)
Chapter 8 Risk and Return
Week 5’s class videos
Part 1 - https://youtu.be/twujv8QQTbc
Part 2 - https://youtu.be/OFctf09sHRQ
Part 3 - https://youtu.be/qM2H0o5mLFs
Chapter 8 case study (due on final date)’
Summary of the steps in the case study:
1st, calculate expected return based on probabilities and corresponding returns
2nd, calculate standard deviation based on probabilities and corresponding returns
3rd, calculate expected return and standard deviation based on probabilities historical returns
4th, Use corr function to calculate correlation based on two stocks’ historical returns.
5th, Understand the concept of correlation and can pick stocks based on correlations
6th,understand what is beta and can calculate beta using slope function
7th, can use CAMP to calculate stock returns.
Homework of Chapter 8 (due on final date)’
1. An investor currently holds the following portfolio: He invested 30% of the fund in Apple with Beta equal 1.1. He also invested 40% in GE with Beta equal 1.6. The rest of his fund goes to Ford, with Beta equal 2.2. Use the above information to answer the following questions.
1) The beta for the portfolio is? (1.63)
2) The three month Treasury bill rate (this is risk free rate) is 2%. S&P500 index return is 10% (this is market return). Now calculate the portfolio’s return. 15.04%
Refer to the following graph. The three month Treasury bill rate (this is risk free rate) is 2%. S&P500 index return is 10% (this is market return).
2. What is the value of A? 2%
3. What is the value of B? 10%
4. How much is the slope of the above security market line? 8%
5. Your uncle bought Apple in January, year 2000 for $30. The current price of Apple is $480 per share. Assume there are no dividend ever paid. Calculate your uncle’s holding period return. 15 times
6. Your current portfolio’s BETA is about 1.2. Your total investment is worth around $200,000. You uncle just gave you $100,000 to invest for him. With this $100,000 extra funds in hand, you plan to invest the whole $100,000 in additional stocks to increase your whole portfolio’s BETA to 1.5 (Your portfolio now worth $200,000 plus $100,000). What is the average BETA of the new stocks to achieve your goal? (hint: write down the equation of the portfolio’s Beta first) 2.10
Years Market r Stock A Stock B
1 3% 16% 5%
2 -5% 20% 5%
3 1% 18% 5%
4 -10% 25% 5%
5 6% 14% 5%
· Calculate the average returns of the market r and stock A and stock B. (Answer: -1%, 18.6%, 5%)
· Calculate the standard deviations of the market, stock A, & stock B (Answer: 6.44%, 4.21%; 0 )
· Calculate the correlation of stock market r and stock a. (Answer: -0.98)
· Assume you invest 50% in stock A and 50% in stock B. Calculate the average return and the standard deviation of the portfolio. (Answer: 11.8%; 2.11%)
Calculate beta of stock A and beta of stock B, respectively (Answer: -0.64, 0)
Chapter 9 Stock Return Evaluation
Stock screening tools
· Reuters stock screener to help select stocks
· WSJ stock screen
· Simply the Web's Best Financial Charts
You can find analyst rating from MSN money
Zacks average brokerage recommendation is Moderate Buy
How to pick stocks
Capital Asset Pricing Model (CAPM)Explained
Ranking stocks using PEG ratio
Summary of stock screening rules from class discussion
PE<15 (? FB’s PE>100?)
Analyst ranking: strong buy only
Zacks average =1 (from Ranking stocks using PEG ratio)
Useful website (recommended by David and Phil. Thanks, David and Phil)
Homework (no homework for this chapter):
(Thanks TO Dr. Lane)
CAPM Calculator: Introduction (www.zenwealth.com)
The CAPM Calculator can be used to solve problems based upon the Security Market Line (SML) from the Capital Asset Pricing Model. The calculator is able to solve for any of the four possible variables given the value of the other three variables.
1. Expected Return on Stock i Field - The Expected Return on Stock i is displayed or entered in this field.
2. Risk Free Rate Field - The Risk Free Rate is displayed or entered in this field.
3. Expected Return on the Market Field - The Expected Return on the Market Portfolio is displayed or entered in this field.
4. Beta for Stock i Field - The Beta for Stock i is displayed or entered in this field.
5. Buttons - Press these buttons to calculate the corresponding value.
o E[Ri] Button - Press to calculate the Expected Return on Asset i.
o Rf Button - Press to calculate the Risk Free Rate.
o E[Rm] Button - Press to calculate the Expected Return on the Market Portfolio.
o Beta Button - Press to calculate the Beta for Asset i.
Thanks to Dr. Lane
The Expected Return Calculator calculates the Expected Return, Variance, Standard Deviation, Covariance, and Correlation Coefficient for a probability distribution of asset returns.
1. Input Fields - Enter the Probability, Return on Stock 1, and Return on Stock2 for each state in these fields. The sum of the probabilities must equal 100%.
2. Expected Return Fields - The Expected Returns on Stocks 1 and 2 are displayed here.
3. Variance Fields - The Variance of the returns on Stocks 1 and 2 are displayed here.
4. Standard Deviation Fields - The Standard Deviation of the returns on Stocks 1 and 2 are displayed here.
5. Covariance Field - The Covariance between the returns on Stocks 1 and 2 is displayed here.