FIN3014—PRINCIPLES OF BUSINESS FINANCE LABBeta Calculation Assignment Due Date: November 14 No late assignments will be accepted for credit. Be sure to save your work. We will be using this project as part of our final project at the end of the semester. Completing this assignment gives you the opportunity to receive valuable feedback for completing future assignments. Goals for this assignment: · Gather historical return data · Use Excel to plot a scatter graph · Use Excel to calculate beta for your stock (the slope of the regression line) · Interpret and present results · Construct a professional memo Your task: Gather data. In this exercise, you will be using the monthly return data that you calculated for your stock and for the S&P500 in your Stock Prices and Returns assignment. You should have monthly return data for your company and for the S&P500 from October 1, 2009 and ending September 31, 2014 (from project 3). Manipulate data. There are several methods for calculating a regression in Excel. For this assignment, we will use the charting capability to calculate beta for our stock. You will begin by choosing the “insert” option above the Excel spreadsheet. You will choose “chart” and then “XY (scatter)” for the type of chart. The chart wizard will guide you through the process. You will want to choose the “series” option to tell Excel what data you want to use. Be sure to use your S&P500 return column for your “X value” and your stock return column for your “Y value”. This process will give you a scatter graph that plots your stock’s return and the S&P500 return. However, it does not give you a regression line or slope. To get a regression line, you will need to click your left mouse key to make several of the data points turn yellow. With your mouse pointing to one of these yellow data points, right click. Choose “add trendline”. We will use the default (linear) trend line. However, you will want to choose “options” so that you can place “display equation on chart”. You may find that your regression equation is difficult to read if it is placed over the data points. You can move this equation to the side of the graph (it is in a text box) so that it will be easier to read. Make sure that you have properly labeled your graph and that your graph has a title. Make observations. · Using the beta you calculated, explain how risky your stock is relative to the S&P500. · Market (aka systematic or non-diversifiable) risk only · Does your stock exhibit more or less systematic risk than the S&P500? · What does your beta imply for expected returns? · Compare the beta that you calculate with the beta that is provided on the http://finance.yahoo.com website for your stock. · Why might the two estimates differ? Formatting. Results should be presented in memo format. Observations should be written in complete sentences in paragraph form. The assignment will be turned in as a hard copy in your Lab on the assign ...

1. FIN3014—PRINCIPLES OF BUSINESS FINANCE LABBeta
Calculation Assignment
Due Date: November 14
No late assignments will be accepted for credit. Be sure to save
your work. We will be using this project as part of our final
project at the end of the semester. Completing this assignment
gives you the opportunity to receive valuable feedback for
completing future assignments.
Goals for this assignment:
· Gather historical return data
· Use Excel to plot a scatter graph
· Use Excel to calculate beta for your stock (the slope of the
regression line)
· Interpret and present results
· Construct a professional memo
Your task:
Gather data.
In this exercise, you will be using the monthly return data that
you calculated for your stock and for the S&P500 in your Stock
Prices and Returns assignment. You should have monthly
return data for your company and for the S&P500 from October
1, 2009 and ending September 31, 2014 (from project 3).
Manipulate data.
There are several methods for calculating a regression in Excel.
For this assignment, we will use the charting capability to

2. calculate beta for our stock. You will begin by choosing the
“insert” option above the Excel spreadsheet. You will choose
“chart” and then “XY (scatter)” for the type of chart. The chart
wizard will guide you through the process.
You will want to choose the “series” option to tell Excel what
data you want to use. Be sure to use your S&P500 return
column for your “X value” and your stock return column for
your “Y value”.
This process will give you a scatter graph that plots your
stock’s return and the S&P500 return. However, it does not
give you a regression line or slope. To get a regression line,
you will need to click your left mouse key to make several of
the data points turn yellow. With your mouse pointing to one of
these yellow data points, right click. Choose “add trendline”.
We will use the default (linear) trend line. However, you will
want to choose “options” so that you can place “display
equation on chart”.
You may find that your regression equation is difficult to read
if it is placed over the data points. You can move this equation
to the side of the graph (it is in a text box) so that it will be
easier to read.
Make sure that you have properly labeled your graph and that
your graph has a title.
Make observations.
· Using the beta you calculated, explain how risky your stock is
relative to the S&P500.
· Market (aka systematic or non-diversifiable) risk only
· Does your stock exhibit more or less systematic risk than the
S&P500?
· What does your beta imply for expected returns?

3. · Compare the beta that you calculate with the beta that is
provided on the http://finance.yahoo.com website for your
stock.
· Why might the two estimates differ?
Formatting.
Results should be presented in memo format. Observations
should be written in complete sentences in paragraph form. The
assignment will be turned in as a hard copy in your Lab on the
assigned due date. Be sure to proofread your work. Your paper
should be free of typos and grammatical errors and presented
professionally. Your future boss will expect professional quality
work and will not waste time trying to decipher your writing.
Looking Forward
This will be part of your company analysis that you will
complete later this semester. Be sure to keep your electronic
files so that you do not have to recreate the work that you have
done.
Grading
Format: 20 points – Professional memo format. Your name,
company name, and indication of content contained are to be
presented in the header. Analysis should be in paragraph form
and the figure should be below the analysis, included in-line
(not printed separately from excel and stapled).
Figure: 60 points – All graphs should have all axes labeled
appropriately, a title, and should be presented neatly (without
overlapping components). This also includes correct data, type
of graph/chart, and all required additional information (such as
legends or trendlines, when necessary).

4. Analysis: 20 points – See “Make Observations” section above.
Analysis should be written in complete sentences and include,
at a minimum, answers to the questions asked above. This is one
of the most important parts of the final project.
FIN 3014 — PRINCIPLES OF BUSINESS FINANCE LABStock
Return Plot
Your assignment is due: November 14
No late assignments will be accepted for credit. Be sure to save
your work. We will be using this project as part of our final
project at the end of the semester. Completing this assignment
gives you the opportunity to receive valuable feedback for
completing future assignments.
Goals for this assignment:
· Calculate monthly returns for your stock and for the S&P500
· Plot a graph
· Interpret and present results
· Construct a professional memo
Your task:
Calculate monthly returns.
For the second lab assignment you collected monthly stock
price data for your assigned company and for the S&P500. This
time we will use this data to calculate monthly returns.
Monthly returns report gains or losses in percentage terms. For
example, we will look at our sample company Valero Energy,
VLO. Assume that I bought VLO stock at the beginning of
January for $23.09 per share. If I wanted to sell the same share
one month later, at the beginning of February, I would have

5. been able to sell it for $22.76. Thus, I would have lost $0.33.
Looking at percentage returns gives us an ability to compare
how poorly (or well) this VLO investment did relative to other
investments. For example, let’s take a hypothetical company,
Roadrunner Enterprises. Assume that Roadrunner’s stock was
selling for $200 a share at the beginning of January. By the
beginning of February, the stock was selling for only $199. If
you had bought one share of Roadrunner stock over this time
period, you would have lost $1.00. In absolute (dollar) terms,
you would have lost more on the Roadrunner investment.
However, looking at percentage returns, we get a different (and
more accurate) picture.
VLO Returns:
(P2-P1)/P1 = (22.76-23.09)/23.09 = - 0.01429 or -1.429%
Equivalently, we could use the formula: P2/P1-1
Roadrunner Returns:
(P2-P1)/P1 = (199-200)/200 = -0.005 or -0.5%
This allows us to compare different investments relative to the
amount of money we have invested in the stock. For example,
if we had had $10,000 at the beginning of January and invested
it all in VLO, we would have lost ($10,000)*0.01429 or
$142.90. If, instead, we had invested the money in Roadrunner,
we would have lost only ($10,000)*.005 or $50.
Using excel, calculate monthly returns for both your stock and
the S&P500 for each month from October 1, 2009 and ending
September 31, 2014. Calculating these returns will require the
“Adjusted Close” for each month (downloaded in project 2).
Plot a graph.

6. You will want dates on the X axis, the returns of your stock and
the S&P500 on the Y axis. Make sure that your graph is
properly labeled, has a title, and is easy for the reader to
understand.
Make observations.
Look at your graph and see what observations you can make.
This observation will vary greatly depending upon the company
you are analyzing. Some things you may want to consider are:
· Has the return on your stock varied significantly from the
S&P500?
· Direction of returns (positive/negative)? Magnitude of
returns?
· Has the return on your stock been much higher or lower than
the S&P500 overall? Note: Higher returns than the S&P would
correspond to overperformance in Project 2 – Stock Plot.
· Has the return on your stock been more variable than the
return on the S&P500?
Formatting
Results should be presented in memo format. Observations
should be written in complete sentences in paragraph form. The
assignment will be turned in as a hard copy in your Lab on the
assigned due date. Be sure to proofread your work. Your paper
should be free of typos and grammatical errors and presented
professionally. Your future boss will expect professional quality
work and will not waste time trying to decipher your writing.
Looking Forward
This will be part of your company analysis that you will
complete later this semester. Be sure to keep your electronic
files so that you do not have to recreate the work that you have
done.
Grading
Format: 20 points – Professional memo format. Your name,

7. company name, and indication of content contained are to be
presented in the header. Analysis should be in paragraph form
and the figure should be below the analysis, included in-line
(not printed separately from excel and stapled).
Figure: 60 points – All graphs should have all axes labeled
appropriately, a title, and should be presented neatly (without
overlapping components). This also includes correct data, type
of graph/chart, and all required additional information (such as
legends or trendlines, when necessary).
Analysis: 20 points – See “Make Observations” section above.
Analysis should be written in complete sentences and include,
at a minimum, answers to the questions asked above. This is one
of the most important parts of the final project.