Question

The annual returns of Mac Corp. and the Market portfolio over the last ten years were...

The annual returns of Mac Corp. and the Market portfolio over the last ten years were as follows:

Year

Returns (%) on MAC Corp.

Returns (%) on Market Portfolio

1

13

-7

2

8

2

3

22

2

4

18

-10

5

15

7

6

-13

13

7

23

8

8

28

20

9

-8

15

10

2

3

11

10

9

12

12

8

13

5

3

14

-3

-5

15

8

7

Find the following for Mac Corp:

a) Standard Deviation of Mac Corp. and the Market Portfolio (Do not use the excel standard deviation function. Show all your work)

b) Covariance between the Mac Corp and the Market portfolio (You can use the Covariance function in excel)

c) Correlation between the Mac Corp and the Market portfolio (Use the covariance and standard deviations to calculate the correlation)

d) Calculate the Beta of Mac Corp.

e) Calculate the market risk and firm-specific risk for Mac Corp.

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