please read carefully, this assignment has 2 parts: I. Risks and returns Extract
please read carefully, this assignment has 2 parts: I. Risks and returns Extract from financial sites available to the public such as NYSE, https://www.nyse.com/quote/XNYS:HD, Google Finance, Yahoo Finance, Bloomberg, historic data of a publicly-traded company of your choice, thereafter The Company, over TWO years, also of your choice. Obtain for the same time the S&P500 Index. Extract from financial sites historic data of a major competitor, also publicly traded, thereafter The Competitor .a. Calculate and present the average monthly holding period returns and the standard deviation of these returns for the SP500 index, The Company and The Competitor. Date S&P 500 The Company The Competitor ….. …………. ………………. ………………. ….. …………. ………………. ………………. ….. …………. ………………. ………………. ….. …………. ………………. ………………. ….. …………. ………………. ………………. b. Plot the holding period returns from the Company against the SP500 Index and from The Competitor against SP500. c. From the graphs in part b) describe the nature of the correlation between the stock returns of The Company and the returns for the SP500 index. Make the same comparison for The Competitor. d. Assume that you have decided to invest one half of your money in The Company and the remainder in The Competitor. Calculate the holding period returns for your two-stock portfolio. The monthly return for the portfolio is the average of the two stocks’ returns. e. Plot the returns of your two-stock portfolio against the S&P500 Index as you did for the individual stocks. How does this graph compare to the graphs for the individual stocks? Explain the difference and the reason for such difference. f. Obtain from Standard and Poor or alternative source such as Yahoo Finance, https://finance.yahoo.com/quote/HD/key-statistics/the betas of The Company and The Competitor. Assume that the Treasury bill rate is 2% and that the expected market return is 6%. In consideration of the betas for The Company and The Competitor, estimate an appropriate rate of return, using CAPM, for each of the two firms. II. Financial statement analysis To complete this section, access the 10-K yearly report of The Company, registered with the SEC for the year of your choice, from The Company’s site or directly from SEC filing site. Write a 1000-word Financial Analysis Report of The Company, under guidance of the questions below. Your report should provide references and should use the Harvard Reference System. Your references do not count towards the total word count of 1000 words. II.a Review items 1 and 3 of the 10K as well as the Report of Independent Registered Public Accounting Firm. Write a concise summary of the important items from reading these items. II.b Analyze the balance sheet of The Company provided by 10K form. Write a summary that includes important points that an analyst would use in assessing the financial condition of The Company. II.c Using The Company’s income statement provided in the 10K form, analyze the profitability, liquidity and solvency of The Company by calculating any ratios deemed necessary for the past three years.
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