Challenge Problem

1.
Please plot the bar graph of the historical annual rate of return for Shanghai Stock Exchange Composite Index and Hong Kong Hang Seng Index.

2.
Go to Online Learning Center at www.mhhe.com/bmm6e, and link to the material for Chapter 12, where you will find a spreadsheet containing 5 years of monthly rates of return on Dell, Consolidated Edison, and the S&P 500.

a)
Calculate the beta for each firm. Use Excel’s SLOPE function.

b)
Does the relative magnitude of each beta make sense in terms of the business risk of the two firms? Explain.