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# Calculate: The historical monthly rates of return for the market index

Question:

Choose one company from Table 1 below. This company will be your case company for this assessment and Task 1 of the next assessment (Case Study 2).

Table 1: Monthly Data for Case Companies Month Adairs (ADH) Harvey Norman (HVN) Nick Scali (NCK) Super Retail (SUL) Monthly returns Monthly returns Monthly returns Monthly returns Dec-19 Jan-20 -2.62% 3.93% 1.44% -7.31% Feb-20 8.52% -12.29% 1.71% -13.54% Mar-20 -62.81% -20.49% -52.73% -42.91% Apr-20 75.56% -5.76% 37.57% 37.15% May-20 18.35% 17.27% 20.43% 31.81% Source: Returns calculated from historical share prices and dividends from Morningstar DatAnalysis Premium. For completion of the assessment tasks, you will also need the following data (see Table 2 below):

Table 2: Monthly Data for Reference Company and Market Index Month Reference Company All Orders Total Returns Index Monthly Month Closing returns Index Dec-19 71814.00 Jan-20 1.00% 75179.00 Feb-20 5.00% 69106.00 Mar-20 40.00% 54634.00 Apr-20 1.00% 59847.00 May-20 -3.00% 62862.00 Source: Hypothetical reference company data. All Ordinaries Total Returns (Accumulated) Index data from S&P https://au.spindices.com/indices/equity/all-ordinaries. Note: You will NOT submit a spreadsheet, but a written analysis (as Word file) for this assessment. Tasks for Case Study 1 Using the data above, calculate: The historical monthly rates of return for the market index only (monthly rates of return for the companies are given); and The historical average rate of return and standard deviation of returns for: your case company; the reference company; the market index; and a portfolio consisting of a 40% investment in your case company and a 60% investment in the reference company.

Calculate expected returns and portfolio beta as follows: Use CAPM to estimate the expected return as at 29 May 2020 for the shares of: