Answer to the question number (a)

Bartman
Industries Reynolds Incorporated

Stock Market Index Includes

Year Stock Price Dividend Price2 Dividend dividend
2015 25.25 $2.50 $62.75 $3.50 11540.98
2014 23.75 2.5 64.3 3.8 8584.7
2013 22.5 1.55 65.75 2.55 7192.98
2012 24.75 2.7 67 1.65 6444.03
2011 26.375 1.766 68.5 2.3 5724.28
2010 24.625 2.6 61.75 3.6 4447

Annual Return
Bartman Industries Reynolds Incorporated Year Market
Index
Includes
dividend
Year Year Year
2015 16.8421053 2015 3.03265941 2015 34.436614
2014 16.6666667 2014 3.57414449 2014 19.348309
2013 -2.8282828 2013 1.94029851 2013 11.6223854
2012 4.07582938 2012 0.2189781 2012 12.5736337
2011 14.2781726 2011 14.6558704 2011 28.7222847
2010 0 2010 0 2010 0
Average Return 9.80689821 4.68439019 21.3406454
Market Index Includes dividend
 Answer to the question number (b)

Standard Deviation

Bartman Market Index Includes

Industries Reynolds Incorporated dividend

8.789707 5.71972951 10.0158308

Answer to the question number (c)

Co-efficient of Variation

Bartman Market Index Includes

Industries Reynolds Incorporated dividend

CV $0.90 1.22101902 0.46933121

 Answer to the question number (d)
Scatter Diagram

Bartmans
Bartmans Linear (Bartmans)
Linear (Bartmans) Linear (Bartmans)
25
y = 0.709x - 5.3241
20 R² = 0.6527

15

10

0
0 5 10 15 20 25 30 35 40
-5

REYNOLDS
16
y = 0.2991x - 1.6977
14 R² = 0.2742
12

10

0
0 5 10 15 20 25 30 35 40
 Answer to the question number (e)

Bartman Industries

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.80792753
R Square 0.65274689
Adjusted R
Square 0.53699586
Standard
Error 5.98090417
Observations 5

ANOVA
Significance
df SS MS F F
Regression 1 201.722162 201.722162 5.63923153 0.09808569
Residual 3 107.313644 35.7712147
Total 4 309.035806

Standard Lower Upper

Coefficients Error t Stat P-value Lower 95% Upper 95% 95.0% 95.0%
Intercept -5.324093 6.91036873 -0.7704499 0.497146 -27.31597 16.6677844 -27.31597 16.66778
-
X Variable 1 0.7090222 0.29857254 2.37470662 0.09808569 -0.2411689 1.65921329 0.2411689 1.659213
Reynolds Incorporated

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.523684
R Square 0.274245
Adjusted R
Square 0.032327
Standard Error 5.62652
Observations 5

ANOVA
Significance
df SS MS F F
Regression 1 35.88806 35.88806 1.133627 0.365097
Residual 3 94.97317 31.65772
Total 4 130.8612

Standard Upper Lower Upper

Coefficients Error t Stat P-value Lower 95% 95% 95.0% 95.0%
Intercept -1.69774 6.500911 -0.26115 0.810876 -22.3865 18.99106 -22.3865 18.99106
X Variable 1 0.29906 0.280881 1.064719 0.365097 -0.59483 1.192949 -0.59483 1.192949

From Graph & by running regression of their return we can say that their betas
are consistent with the graph.

β Interpretation:

Bartman Industries: 1% change in Market Return will lead to a 0.7090 % change

in the company’s stock return.
Reynolds Incorporated: 1% change in Market Return will lead to a 0.299 %
change in the company’s stock return.
 Answer to the question number (f)
Given,
Rf = 6.04%
Rm – Rf = 5%
Rm = 5 + 6.04 = 11.04 %

KBartman = Rf + (Rm – Rf ) βBartman KRaynolds = Rf + (Rm – Rf ) βRaynolds

= .0604 + .05* 0.709 = .0604 + .05* .29906
= 0.09585 = 0.075353
= 9.58% = 7.53%

Answer to the question no. (g)

The weight of both companies is mentioned, Wi = 50% = 0.5
Bartman, β = 0.709
Raynolds, β = 0.29906

Portfolio beta, βP = ∑ Wi βi
= .5*0.709 +.5* 0.29906
= 0.50403
Portfolio required return, Ke = Rf + (Rm – Rf ) βP
= 0.0604 + .05* .50403
= 0.08560* 100
= 8.56%
Interpretation: To invest in Bartman &Reynolds I require minimum 8.56% return rate
otherwise I will not invest on those company.
 Answer to the question no. (h)

Company Beta (β) Weight (W)

Stock a 0.769 15%
Stock b 0.985 40%
Stock c 1.423 20%
Bartman Industries 0.709 25%

Portfolio beta, βP = ∑ Wi βi
= 0.15*0.769 + 0.4* 0.985 + 0.2* 1.423 + 0.25* 0.709
= 0.971
Portfolio required return, Ke = Rf + (Rm – Rf ) βP
= 0.0604 + 0.05* 0.971
= 0.10895* 100
= 10.89%

Interpretation: To invest on those stock I require minimum 10.89% return rate otherwise I will
not invest on those company