I’m studying for my Finance class and don’t understand how to answer this. Can you help me study?
Question 1. (27 marks)
You have been following the prices of SMU Dawg and recording the following information:
Date
Open
High
Low
Close
Adj Close*
Dividend
Volume
1-Jul-21
62.50
62.50
61.35
61.75
61.75
0.625
27,454,900
1-Jun-21
62.90
64.35
61.32
61.90
61.28
35,919,800
1-May-21
63.37
64.69
61.33
62.71
62.09
31,563,300
1-Apr-21
61.61
64.40
60.78
63.38
62.75
0.625
28,179,500
1-Mar-21
61.41
62.80
60.54
61.37
60.15
43,585,500
1-Feb-21
61.55
62.88
60.35
61.06
59.85
34,410,600
1-Jan-21
60.83
65.24
60.28
61.39
60.17
1.130
30,801,200
1-Dec-20
61.00
62.84
58.12
60.54
58.25
35,638,500
1-Nov-20
60.91
61.73
57.36
60.33
58.05
58,022,600
1-Oct-20
62.52
63.00
60.11
60.72
58.42
0.565
21,743,700
1-Sep-20
59.51
63.41
58.98
62.31
59.41
0.565
30,764,200
1-Aug-20
60.09
62.44
58.76
59.47
56.17
30,263,900
1-Jul-20
59.06
61.44
58.15
60.54
57.18
43,506,900
* Remember to show all of your work *
a.
Using the adjusted close, calculate the ex-post returns for SMU Dawg for each period.
(6
marks)
b.
Calculated the arithmetic mean for stock A.
(2 marks)
c.
Calculate the geometric mean for stock A.
(3 marks)
d.
Calculate the standard deviation or the risk associated with stock A.
(3 marks)
e.
Based upon your calculations, what do you think the expected price will be on August 1 and
what assumptions did you make to arrive at this expected price?
(4 marks)
f.
What form of market efficiency did you use to calculate the expected price? Explain.
(2
marks)
g.
You were listening to the news at supper time and you heard a report of a pending new
product that SMU Dawg will introduce to the market next week that will change the
company’s product offering. Will this information have a potential of changing your
estimate that you provided in part e? Explain.
(3 marks)
h.
What form of market efficiency did you incorporate in part g? Explain.
(2 marks)
i.
If the market is
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